A report from The Guardian, Revealed: global video games giants avoiding millions in UK tax, has shown that four large companies have claimed close to half of all Video Games Tax Relief (VGTR) since the scheme’s inception. The cost of Video Games Tax Relief has spiralled to over £100m a year, and since 2014 has seen WarnerMedia claim £60m, Sony £30m, and Sega £20m.
We have dug further into the accounts, and seen that not only are multinational companies claiming millions in relief, many are also engaging in tax avoidance, specifically profit shifting. The two companies which we have studied demonstrate that the VGTR scheme is almost bound to ensure that the UK games industry will not pay corporation tax – regardless of how successful the industry becomes. These examples highlight both how generous the relief is and how it can be open to abuse by companies which engage in tax avoidance.
Video Games Tax Relief is a poorly executed scheme. The intent is to promote British culture, and to foster innovation amongst small independent games developers through subsidies. The reality is that this scheme is being used as state-aid, acting as corporate welfare for multi-national companies worth billions.
- The full report can be found here.