I’m developing a video game, what tax reliefs are available to me?
Am I eligible for VGTR?
Understanding Video Games Tax Relief
Video Games Tax Relief (VGTR) is a financial incentive designed to support the video game development industry in the UK. Introduced in April 2014 by the government, VGTR aims to encourage the production of culturally British video games and bolster the sector’s growth. We have experience working with game developers across the UK and understand the complexities of understanding eligibility criteria, the application process, and how to apply.
VGTR has become a crucial support mechanism for developers, fostering innovation and growth within the industry. In our next article, we will be providing an update on the Video Games Expenditure Credit (VGEC), and the opportunities it presents for developers. If you’d like to know more now about VGEC, speak to our experts today…
Many developers don’t claim the relief they’re entitled to, usually because they either don’t realise, they’re eligible or don’t know how to maximise their claim. Should you have any questions for our team of experts on any gaming related enquiries, please contact the team at Price Bailey.
Parry Jackson, Partner
Why should I claim VGTR?
The government offer a suite of eight tax reliefs to support creative companies; VGTR provides extra support for both physical content and download-only. The value of VGTR for a video game which has been entirely developed in the UK, or the European Economic Area (EEA) is granted at up to 20% of qualifying spend. In short, this refers to the amount of expenditure on everything from designing to testing the game (including DLC alongside other spending required after release).
To claim VGTR you must…
- Be responsible for designing, producing, and testing the video game.
- Spend at least 25% of its core costs on goods or services provided within the UK or the European Economic Area (EEA).
- Be a company. Partnerships, LLPs, and individuals are not eligible to claim.
- Be subject to UK Corporation Tax.
- Pass a cultural test managed by the British Film Institute (BFI), certifying the game as British produced. Please note, games created solely for advertisement, promotion, or gambling purposes are excluded.
Qualifying Costs
Core costs eligible for VGTR include expenses related to designing, producing, and testing the game, such as salaries, animation and audio costs, payments to third party contractors. These costs must be incurred within the UK or EEA.
Claiming the Relief
Companies can claim VGTR through the Corporation Tax system. The relief allows for an additional deduction to reduce taxable profits or increase a loss, which can be surrendered for a payable tax credit at a rate of 25%.
The process of claiming VGTR involves a few steps:
- Apply to the BFI for an interim cultural certificate, which confirms that your game meets British criteria before it’s completed. This allows you to start claiming relief as you go.
- Once your game is finished, get a final certificate from the BFI and incorporate the VGTR claim into your company tax return. HMRC will then either reduce your corporation tax bill or, if you’re loss-making, send you a cash payment. Offering a payable tax credit for losses, enhances cash flow for game development companies
FAQ’s
Can I claim both VGTR and R&D tax relief at the same time?
You cannot claim both tax reliefs at the same time for the same project. This means that if parts of your game development qualify for R&D relief, you’ll need to decide which incentive will be more beneficial for your business.
How long does the VGTR application process typically take?
The BFI aims to process VGTR cultural certificates within 28 days, provided the application is complete and no further information is required. The overall claim process through HMRC can take a bit longer, so it’s advisable to start your application early.
In creating my game my eligible spend is £2 million, what am I eligible to receive?
The relief will be £400,000, calculated as 20% of 2 million.
What has the impact of the relief been on the gaming industry?
Since its introduction, VGTR has played a crucial role in supporting the UK video game industry, fostering innovation and creativity. It has helped numerous companies thrive, contributing to the sector’s overall growth and international competitiveness.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.
Have a question for the team? Use the form below...
Sign up to receive exclusive business insights
Join our community of industry leaders and receive exclusive reports, early event access, and expert advice to stay ahead – all delivered straight to your inbox.