Posts Tagged ‘tax credit’
In Alastair Darling’s 2010 budget he announced that he wanted to offer help to the computer games sector, similar to the steps which are helping to restore the fortunes of the British film industry, acknowledging that we need to find a way to keep British talent in this country.
I was lucky enough to be invited to the ‘Games Tax Relief Summit’ hosted by Deloitte and attended by a healthy mixture of some of the smaller studios and some of the heavy hitters in the games industry namely Sony, EA and Activision Blizzard.
It is with crossed fingers that we are all approaching George Osborne’s new budget on the 22nd June as we are hoping that the new government will honour the hard work of Richard Wilson and his colleagues at TIGA in raising awareness of the problems faced by the games industry in this country.
I was honoured to be invited to speak at the All Party Parliamentary Group earlier this year at the House Of Commons to help throw some light on the issues faced by start up games companies in the UK, and encourage MPs to act on our behalf. Issues such as gaining and retaining talent, the lack of funding available to smaller companies with no tangible assets and the quality of graduates and University courses in the gaming sector to name but a few.
At the Summit, all the representatives were offered the chance to input to the structure of the proposed games tax relief in order that it will suit all size of companies and all types of online and offline games. The relief was initially designed to steal elements of the film tax relief and the R&D tax credit system although it became apparent that both of these systems have their problems and shoe-horning this tax credit into one of those formats will simply not be effective enough.
The games sector contributed approximately £1 billion to the UK’s GDP in 2009 and generated £400 million for HM Treasury in tax revenues and is under stiff competition from the likes of Australia, Canada, China, France, South Korea, Singapore and the USA, all countries that receive regional/state tax breaks for games production or other significant financial assistance.
The generous tax credits in areas such as Quebec in Canada have created pockets of amazing gaming talent, Quebec is now considered to be a made up of ‘games clusters’, areas where the games industry is supported by government, educational institutions and other community services. I would love gaming to be treated the same way in the UK and for the same phenomena to occur here.
Fingers crossed for the new budget.
I was horrified to read that less than 10% of SMEs in the UK reclaim R&D tax credit.
Having just been through this at Mind Candy I can see why the process has the reputation for being difficult and confusing.
I love small companies, and the amount of tax credit available in the form of a cash rebate to those that are loss making can make a real difference to cash flow, especially in these turbulent times. In this case the cash credit payable is equivalent to £24 per £100 of qualifying expenditure, quite a significant sum. The company must surrender part of its loss so that it can’t be used against future profits. It must also have paid PAYE and NICS on remuneration in the period of an amount at least equal to the tax credit claimed.
For companies making a profit, or who have no PAYE payments in the period, the tax credit works by providing an enhanced loss.
There is a significant lack of readable information available about reclaiming, even the information given on the HMRC website is confusing. I must say though that the R&D unit that we went through (based in Cardiff) were very helpful indeed.
There are several points that I hope will help other SMEs to reclaim:
*The R&D credit is not reclaimable on the short form CT600, only on the longer form, this is available from the HMRC website.
*Download the information available from the HMRC website, you will find an excel template to help you to work it out, information about what you can and can’t reclaim, and a guide to the questions that need to be addressed in respect of a claim.
*Create an overview document that introduces your company/products/services and answer the questions mentioned above clearly, we included:
*What was the scientific or technological advance?
*What were the scientific or technological uncertainties involved in the project?
*How and when were the uncertainties overcome?
*Why was the knowledge being sought not readily deducible by a competent professional?
*Pull together evidence for the work claimed in whatever form – we submitted architecture diagrams, developer commit logs, payroll records and invoices for consumables.
*If you have a patent, it can be influential to a claim, include it.
*Your accountant (if you have one) may not have mentioned the R&D tax credit to you, mention it to them, they can help you.