The director of London-based Alpha Investments and Financial Planning said the new tax relief, which enables video game companies to be eligible for a payable tax credit worth 25 per cent of qualifying production costs, could boost investment through enterprise investment schemes or venture capital trusts.
Mr Solomons said: “This is good news for VCT and EIS investment. I think the government is concerned with some EIS investment being too low risk and suspect they have their sights on fixed agreements with television productions companies, for example, as it knows what the profit margins might be.”
His comments came after Ed Vaizey, the minister for creative industries, confirmed the new corporate tax relief will come into effect from 1 April 2014 providing around £35m of support a year to the video games sector.
There are currently around 500 games development studios in the UK, employing around 9,000 staff and in 2013 sales of video games in the UK totalled £2.19bn.
Mr Vaizey said he hoped it “would build on the successful model of the film tax relief” which can be claimed on production expenditure in the UK, and the new high-end TV and animation tax reliefs.
Some film companies use tax credits paid by the UK government which rely only on the film being finished to repay private investors.
In 2011 to 2012 the film tax relief provided more than £200m of support to around 200 films. Since its introduction in 2007, direct employment within the sector has almost doubled and 1,050 film productions have made 1,900 claims, for a total £1.1bn.
Adviser view
Robert Forbes, IFA at London-based Plutus Wealth Management, said: “It is a wholly positive move and makes perfect sense as the UK should focus on its creative skills and unscalable businesses. We must however make sure it is not abused, in the way tax breaks for films that don’t exist have been.”
