Credit system under scrutiny
Grand Theft Auto firm took millions in subsidies, paid no corp tax
Rockstar North: taken advantage of the system (pic: Terry Murden)
Scotland’s most successful games developer has not been paying corporation tax despite collecting millions in subsidies, it has emerged.
Edinburgh-based Rockstar North, producer of the smash hit video game Grand Theft Auto, and its US parent company, collected £42 million in tax credits between 2015 and 2017 while it paid zero corporation tax over ten years , according to a new report.
Rockstar North, based in the former offices of The Scotsman newspaper in Holyrood Road, is a subsidiary of Take-Two Interactive Software, which is based in the United States and listed on the Nasdaq.
The company is behind some of the world’s biggest-selling video games. Grand Theft Auto Five has sold 95 million units, according to Take Two’s most recent annual report. It is also the developer behind “Red Dead Redemption.”
Grand Theft Auto: ‘eye-watering returns’
“Think tank TaxWatch UK, author of the report, says Rockstar North is not accused of anything illegal. Instead, the ability of the company to legitimately claim huge sums in tax credits has raised questions over the system that allows it to happen.
If the company had booked higher profits it might have been excluded from claiming Video Games Tax Relief Scheme, which was launched in 2014 by the UK government to provide targeted support for games that were “culturally British”, with a particular focus on support for small and medium sized businesses.
The effect of tax credits and previous year adjustments means that over 10 years the company recorded a net loss for tax purposes, paid nothing in corporation tax, and claimed £70m in credits from HMRC. The amount of credit claimed by Rockstar North from HMRC was almost six times its operating profit over the period.
The report asks how is it possible that a game made in the UK, generating billions of dollars in profit for its parent companies and senior management, makes a loss for tax purposes in the UK and is able to claim tax back from the government?
Grand Theft Auto I was first developed in the UK by DMA Design in the late 1990s. After DMA was bought by Take-Two, game development continued at Rockstar North. It has produced eye-watering returns for the team behind it:
$800m – sales of Grand Theft Auto V in first 24 hours of release
$6bn – estimated total sales of Grand Theft Auto V since 2013, making it the most commercially successful product in the history of the entertainment industry
$3.4bn– total bonus pool available to top managers and staff at Rockstar Games 2009-2019
TaxWatch says: “Despite the huge success of the title, our analysis shows that Rockstar and Take-Two companies based in the UK have not paid any corporation tax over the last ten years. Rockstar North Ltd, which led the game’s development, has in fact claimed £42m in subsidies from the taxpayer over the last three years in the form of credits through the Video Games Tax Relief regime.
“The fact that such a large amount of that relief is going to the developers of Grand Theft Auto clearly shows that the relief is not working as intended,” said the think tank in its report Gaming the Tax System.
It said its analysis shows that the amount claimed by Rockstar North is the equivalent of 19% of the total relief paid to the entire video games industry in the UK since the programme came into effect.
“This raises serious questions as to whether the relief is being properly targeted, at a time when the industry is lobbying for the relief to be expanded and made more generous.”