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Guide to Videogames Tax Relief

UK Video Games Industry

The UK’s Video Games Industry is thriving and currently contributes £1.25 billion to the country’s GDP.

(TIGA Report, August 2016). The new Video Games Tax Relief (VGTR) is a way to support employment and investment in the sector; as well as decreasing risk and costs. Making sure you claim your VGTR is a smart way to enhance your competitive edge.

Guide to Videogames Tax Relief tax credit guide

What is VGTR worth?

If you meet the eligibility criteria, VGTR is worth approximately 20% of your production and development costs back, as a tax benefit. This is calculated from either 80% of your ‘core expenditure’ or your EEA expenditure total, whichever is the lowest figure.

Every video game is considered a separate ‘trade’. As part of the VGTR scheme, if your game makes a loss, you can surrender the loss and receive 25% tax credit.

The VGTR scheme has no set margins for minimum or maximum project spend.

Company eligibility

For your company to be eligible to apply for VGTR, it must:

  • Be registered with Company House
  • Be paying Corporation Tax
  • Spend a minimum of 25% of the core costs within the EEA
  • Be certified by the BFI – more on this later!
  • Design, plan, develop, test and produce the video game that is intended for public consumption

What types of games qualify for VGTR?

  • Standard, boxed video console games
  • Download only games for use on smart devices, including ‘free-to-play’ games
  • PC games

Some games are not eligible due to content; such as those for gambling or advertising purposes.

Only one VGTR claim can be made per game, even if more than one company is developing it simultaneously.

‘Cans’ and ‘cant’s’ – what ‘core expenditure’ means

You can only claim for ‘core expenditure’ costs on the VGTR scheme.

Costs you can claim for:

  • Design
  • Planning
  • Production costs
  • Testing the game

Costs you can’t claim for:

  • Debugging the finished product
  • Maintenance costs
  • Advertising
  • Finance
  • Marketing
  • Publicity
  • Printing

It is difficult to unravel your budget and pull out the ‘core expenditure’ costs that are relevant to your VGTR claim. Most Video Game Development Companies (VGDC) consider it wise to hire a VGTR specialist, like Tax Rebate Service, who will sort this out as part of the process.

Good to know…

  • Claiming for ‘post-release’ content costs are a possibility – a bit of a fuzzy area
  • You do not need to have a finished game in order to apply
  • You do not have to own the intellectual property rights to the technology used in your game
  • You cannot claim R and D and VGTR on the same product, so it is important to decide which makes more financial sense before submitting any claims

BFI Certification

Your game must pass the British Film Institute’s (BFI) ‘cultural test’ in order to claim VGTR – an interesting addition to the expected set of tax relief requirements. This test determines if your game can be certified ‘British’. It has 4 sections:

  1. Cultural Content: setting, characters, subject matter and dialogue of your game. This section is the most heavily weighted in terms of points – maximum of 16.
  2. Cultural Contribution: how well British diversity, heritage or creativity is represented in your game. Maximum of 4 points available.
  3. Cultural Hubs: how many of the elements of development, design, programming, recording are being done in the UK. Maximum of 3 points available.
  4. Cultural Practitioners: how many of your staff, in a variety of roles, are citizens or residents of the EEA. Maximum of 8 points available.

To pass the test, your game must get 16 of the 31 available points. It must also be able to receive the PEGI age rating to get the certificate.

Games are often set in imaginary worlds and this does not negatively impact your chances of passing. However, if you do not have characters in your game, more investigation and discussion with the BFI will probably be necessary.

There are two different certificates and you do need to apply for both at the relevant time. The Interim Certificate is crucial to your application for VGTR and can be applied for any time before or during your video game’s development process. It is valid for 3 years from the date of issue. You can apply for the Final Certificate when your game is finished and ready for public viewing.

The forms are online and there is a lot of other information about which supporting documents you need to supply to the BFI so they can administer your game’s cultural test. This includes scripts, visuals and an accountant’s report and any incomplete applications delay the issuing of your ‘British’ certificate. If everything is present and correct, it usually only takes the BFI a month to process your game’s test and issue your certificate if you are successful.

How we do VGTR claims

So, after reading our succinct summary, you are pretty sure that your game would pass the BFI test, your company’s eligible and you’d love the money to invest in your next game. BUT – you really haven’t got the time to go through all the details and get your claim organised. Well, you don’t have to – that’s what we’re here for.

Our fully qualified and regulated accountants will sort out your BFI test application, put together a bespoke VGTR claim and differentiate between the different tax reliefs available to find the best solution for your business.

With our many years of experience, we know the tax regulations inside-out, including R and D and Patent Box. We are also very aware that new tax relief schemes, like VGTR, can evolve over time and keep completely up-to-date with any HMRC announcements. We maximise our clients’ tax relief claims because we apply the correct schemes to the individual business.

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