The company behind the LEGO video games, WarnerMedia, has used a tax policy intended to support the UK games industry to avoid millions of pounds in corporation tax.
WarnerMedia, owner of Traveller’s Tales – the developer behind the LEGO games series – has been avoiding millions of pounds in corporation tax, the Guardian reports, along with other gaming companies including Sony, Sega and Take-Two Interactive.
Video Games Tax Relief (VGTR) was introduced by the UK government to allow games developers to claim up to 20% of production costs back, with the intent that it would help small and medium sized businesses. The Guardian notes that the European Commission was concerned that the incentive could be used by larger companies, but was persuaded it would support “a small number of distinctive, culturally British games which have increasing difficulties to find private financing”.
Now, five years since its introduction, the broadsheet finds that tens of millions of pounds in corporation tax has been avoided by the world’s largest entertainment companies, with almost half of the relief going to four “large foreign-based companies”.
The cost of VGTR to the UK taxpayer has increased to over £100 million a year, treble what it was forecast to be.
Alex Dunnagan, a researcher at TaxWatch UK, tells the news outlet the relief has “become a cash cow for large, tax-dodging multinational corporations who are milking the system to extract hundreds of millions of pounds in subsidies from the British taxpayer.”
A spokesperson for the video game sector emphasises that the scheme has helped the UK be competitive in the global field of video game development.