Chancellor hints at U-turn on games tax relief

After ditching the previous Labour administration's pledge to offer tax relief to the UK gaming industry in his Emergency Budget, Tory Chancellor George Osborne may be planning a U-turn.

Scottish National Party MSP for Dundee, Joe Fitzpatrick, wrote to Osborne complaining that video game developers in his constituency were losing out to foreign rivals. The recent decision not to offer tax breaks could, he said, lead to the loss of 200 jobs in Dundee over the next five years.

In a reply sent by Osborne, Fitzpatrick says the Chancellor indicated the government was planning a rethink of the policy.

The Chancellor wrote: "The UK's R&D tax credit schemes provide an internationally competitive tax regime for R&D activity, providing nearly £800 million of relief and supporting around 7,500 innovative companies each year, including companies in the video games industry.

"To ensure the continued effectiveness of the schemes, the Government will consult with business in autumn 2010 to review the taxation of intellectual property, the support R&D tax credits provide for innovation and the proposals of the Dyson review."

The Tory-sponsored report, Ingenious Britain, published in March by vacuum cleaner entrepreneur Sir James Dyson, had recommended tax incentives to encourage small businesses involved in hi-tech industries.

MSP Joe Fitzpatrick said: "I welcome this announcement from the Chancellor which is a recognition that, although he did not introduce tax relief in the emergency Budget, he is willing to review that decision."

In a press release, Dr Richard Wilson, the head of games developer body TIGA, said, "The Treasury's decision to drop Games Tax Relief in the June Budget was a mistake. The UK video games industry is export oriented, employs highly skilled people and is low carbon in output. It is an industry of the future."