The European Commission has opened an in-depth investigation into the proposed UK video games tax relief. The UK Government announced at Budget 2012 the introduction of corporation tax reliefs for animation, high-end television and video games production for qualifying expenditure incurred on and after 1 April 2013 subject to State aid approval by the Commission. However, according to a recent press release, the Commission considers that there is no obvious market failure to justify State aid, in what it considers to be a dynamic and growing sector.

The opening of an in-depth investigation does not prejudge its outcome, although the Commission has already stated that it doubts that the aid is necessary. Commission Vice-President in charge of competition policy Joaquín Almunia observed: “The market for developing video games is dynamic and commercially promising. It is not clear whether the taxpayer should be subsidising this activity. Such subsidies could even distort competition.”

Full details of the Commission's press release are available on the website.