Myriad's Barrie Dowsett on getting public money for your game

good morning everybody my name is Barry diocese and I'm the CEO of mirin associates I'm a qualified accountant and i was working within industry about five years ago and i decided to give up the real comfortable world of or the corporate world of working for a business looking at the same four walls to set up myriad and I've immersed myself in to the public funding landscape for the last five years so the kind of story that I take home all the or the bedtime story that i have is not the most exciting one unfortunately but does it does put me to sleep which is great what i will talked about today natural fats is yes certainly how to secure seventy percent public funding but more importantly I'll talk about 22 opportunities that are actually available on the UK scene but also at a EU level as well obviously a very valid

question why is public funding so attractive and also why I've got so many friends as well in helping people and businesses secure public funding and that is because it's non repayable it's not it's not alone it is money that's gifted from the UK or from the EU they don't look to take any equity dilution in your business whatsoever so you're not giving up shares which is fantastic you retain all the IP right so if that you develop along the longer journey you keep those IP rights and also future commercialization benefits you retain those as well so this is money that's available UK public money as well as EU public money and clearly if you get funding it d risks the project from a finance perspective of course because you've got seventy percent up to seventy percent funded but also through a

technical perspective as well allows you to bring in a stronger development team to be able to take that project to 22 the to the market there is two key streams of R&D funding that i'll talk to you about on the left-hand side R&D grant funding there's a organizing organization which is actually a quango called innovate UK and innovate UK's to fund and support and innovative type businesses and they focus on what i will call early stage research and development so feasibility studies proof of concept development of prototypes in the autumn statement that we've just had there's a few question marks about innovate UK however what they have said is that it's half a million pounds which will continue to be available on an annualized basis until 2020 it's half a million pounds a lot of this money also

goes into SMEs as well however 165 million pounds of what's available innovate UK will be converted to learnt it's becoming less attractive however there is that support going forward and then something which is very very exciting his horizon 2020 which is from the European Commission horizon 2020 natural fats is a seven-year programme there is 80 80 billion euros available under horizon 2020 the next two years 16 billion will go into supporting R&D projects and that is to drive growth and create new jobs now what I would say about horizon 2020 is that there's actual fact a specific SME instrument as well as well as the ICT sector so on the SME instruments there is 800 million pounds that's available and under the ICT courses a separate core there's 1.1 billion that's just in the next two

years and then if I go away from grant fund money that's available which you apply for a grant funding it's a competition you may be successful national success rates vary between five to fifteen percent if I then come across to what's available in the UK under hm revenue and customs the first thing I would say is that under hating reviewing customs skins were available but please remember this is government-funded money why is it under hm revenue and customs it's very simple they have the mechanisms and the levers to change it very quickly and the infrastructure to support this as well and there is a number of things i'll talk to you about SE is seed enterprise investment scheme and that simply allows investors particularly for a start-up to invest and get a 50-percent income credit on their self-assessment that's fifty percent are quite substantial and i'll talk about that in a minute and actual about how you can blend seed enterprise investment

scheme with video games tax relief and the other one which i taught you about which is the old chestnut is R&D tax relief it's been around since 2001 and that is there to support development of technical advancement projects that are looking to advance technology okay i'm going to talk about rd grant funding first before i go on to some of the HM Revenue & Customs i mentioned to innovate UK remember this is a 500 million pounds pots of money that's available to invest in businesses a lot of it as i said goes into SMEs that's generally split into two areas there's a general pot of money which is known as smart grants and there is some specific calls as well now at the moment a lot of this is on hold we are waiting for the detail to come through but i think it wants some of it will be released in the next two to three months for smart grants that is available to any SME

that's got an idea so it can be for game development industry it's engineering manufacturing you make an application the grants awarded up between twenty-five thousand two hundred fifty thousand they will contribute between forty to sixty five percent of your costs for projects that last nine to twenty four months it is for early-stage development proof of market proof of concept developed a prototype yes it is possible to put projects through such as developing production tools game engines etc and we've been successful making those claims under smart grants and then they have some specific areas those specific areas will be a particular project the one which is live at the moment actually going through is cross-platform production in digital media there is two million pounds available which the government needs to spend by the end of March that is available we've got a few a few claims going through on that one but they are announced that available on the innovate

UK websites horizon 2020 I'm going to talk to you about the SME instrument so I think it'd be more relevant than what's out there's a mentioned there is a huge amount of money 16 billion the next two years the great thing about the SME instrument this is about taking your projects projects and taking it to the market I would certainly this two phases involved with this phase one is a lump sum of fifty thousand euros and that is to support market analysis risk assessment designer market studies you get seventy percent funding of your project they put the grants is fifty thousand euros and it's a lump sum 50,000 us it's paid at the start of the project to you where the big money is though is in phase two and one of things i would say about the SME instrument it can be single business lead you haven't gone nice going to consortium and don't need to find partners an actual fact they encourage you to leave ugh just one SME yes startups can apply and an early-stage businesses as well which is

absolutely great up to two and a half million pounds available for your project you do get seventy percent funding your thirty percent can come from internal cash resources or even when it means by benefiting kind simply means you put the time and effort in and you pay the costs associated with that as part of your normal business it's about taking your R&D project out of technical stage into making it ready for commercialization so I mean they are looking to back winners of course look into back high-growth highly innovative businesses that are going to disrupt the market okay now when I talk to you about hm revenue and customs and I'm going to show you how you can blend the seed enterprise investment scheme with video games tax relief and one thing I will cover at the end of the the presentation is how does

video games touch relief work with R&D tax credits and I know that this is a few viewpoints on this but one which we've been successful i'll certainly share that with you so I'm just show you now a recipe there's the cake and I'm going to take you through step one okay and this is where you get fifty percent back from your investment so you need to have a business that's been startup business certainly been trading it less than two years you ideally want for investors because each of those investors can't hold more than thirty percent each in that business a lot of these seeds are structured for seed enterprise investment schemes as well and those investors can invest at 150,000 pounds in a startup business you then make an application for a SE is certificate available formation revenue

and customs you fill out some paperwork you've got your business less than two years old and you now have 150,000 pounds investing that business each of the investors will get income tax relief of fifty percent to half that money will come back through their self-assessment so what do you do 150,000 pounds well you decide to make a few computer games it can be mobile games pc driven console etc and you make a video games touch to leave claim you go through a obtain a certificate from BFI mats with a cultural test which you need to ensure that it is British and it's fair to say that if you're UK development seem a management team are based in the UK you're almost there anyway but is quite a well-documented process that's ministered by the British Film Institute of course you need a pinch of

dedicated employees that are going to produce this wonderful game for you and then once I've done that you then make a video game tax relief quaint hm revenue and customs and you make that through the company's tax return per game you need to create in essence a profit loss account per game the written talk here and some about do I set up a special company to do this an entity also known as a special purpose vehicle which is a posh word for it but generally speaking you will make an application for that game and that will give you an additional twenty percent support on your production costs so that's your design that's your programming that's your testing planning costs of delivering and mother costs as well of delivering that particular game so as you can see in step one your chief fifty percent income support in terms of income tax support for the investors and

then you gain another twenty percent for your business in terms of a video games touch relief and that is made retrospectively you have to go through the process and you make that as part of your company's tax return okay on my last slide here I'm just a touch on something video games tax relief which you can see is in the red corner it's a new player it's only been around for almost two years now and we've got the much bigger Giants the R&D tax credits in the blue corner so if it against tax relief I mean some people probably wondering which one do i claim can I claim both I'll just go through the pros and cons of doing that so video games tax relief is yes allows you to obtain twenty percent rebate on game production costs so you can include in that yes your program of developers artists animators and members new management team as well you need to pass a cultural test which is administered and the

certificate from BFI which is film institute and you also need to produce a profit and loss statement per game to go across to hate and revenue and customs and don't underestimate there's a little bit of work to do and as I said some people will create a game providing the budget is significant into a separate entity as well so they control the costs make it absolutely clear R&D tax credits however gives you up to 26 read percent rebates on costs that advanced technology so this is projects that you've commenced and they could be related to a number of areas such as game engine production tools etc but you need to advance technology from as an industry perspective you need to push the boundaries of the particular industry yes it's more available at twenty six percent you also have to supply a technical justification to haiti and revenue and customs and you

have to explain the advancements the uncertainties that you went through and also you have to provide them with the R&D costs and that is once again done as part of the company's tax return so it's done in arrears typically three to six months after your end of your accounting period the great thing about R&D tax credit is also you can go back two years as well so you've not made a claim for that you develop some technology you're able to put a claim going back to to accounting periods so how we handle video games tax relief and R&D tax credits what is for a number of our clients is is that if you're developing core technology clearly twenty six percent is much more attractive than twenty percent so we we do suggest a mix and mix-and-match approach where you will claim video games to actually and R&D tax credit it is possible to make two claims however it's very important you can't double dip in terms of costs if you've got a developer working on technology also working on producing

their game you weren't able to claim more than hundred percent of these costs you have to split those costs accordingly to based on time records or best estimates can be allowed although only for short term this we'd also recommend for high-value games as well that you set up an SPV entity it's a special purpose vehicle this is where you've your game is of a certain size and budget that would warrant that as well and that game and needs to be done for commercial reasons more than tax reasons that's very important but you would enable to get the full maximum benefit out of video games tax relief which is twenty percent so as I said it's possible to do to claims a great example of where where it would be wise to do that is where you've got a game engine you've developed that technology and its use a number of of your your game is this particular platform you've developed our suggestion

would would be certain look at making a R&D tax credit claim for your technology of developing of that particular game engine or it could be able to certain in-house production tool kind of thing and then the games that you develop using that core technology you could make a claim under video games tax relief for the production cost you animators your artists etc and it's very difficult to get costs associated with animation and artists under R&D tax relief it's possible but there's to be a very strong justification to hm revenue and customs and I think I'm just coming to the end of the presentation and just about out of time as well she's perfect I know it sounds like a maze and it is a maze five years you know I've immersed myself in all this public funding that's available there's a lots of steps to go through it's very difficult for me i can give something to give the options that are available to very thoughts go into the details but one of the things that i

would say if it does the whole essence of public funding look like this to you please come and see us i'm available available for rest of the day you will find me upstairs on the first floor on stand 219 just very close to the VIP meeting area so thank you very much for listening yes shhh