One of several UK tax reliefs aimed at the creative sector, Video Games Tax Relief (VGTR) allows eligible companies to receive a payable cash tax credit on qualifying R&D expenditure.
Any video game that is intended to be supplied to the public can be the subject of a claim, as long as it meets the requirements of the Cultural Test as prescribed by the British Film Institute. If successful, a certificate will then be issued by the Department for Digital Culture Media & Sport (DCMS).
The other key piece of criteria is that a minimum of 25% of the total “core” expenditure on the video game’s development must have taken place inside the European Economic Area (EEA).
At Myriad Associates, we have years of experience in assisting both businesses and accountants with all aspects of VGTR and other R&D tax reliefs. During that time we’ve learned a great deal, especially ways in which studios can maximise the value of their VGTR claim.
Take a look at our six top tips:
Right from the start, it’s important to structure your company in the correct way to avoid missing out on certain benefits. Get in touch with a specialist R&D tax firm such as ourselves, in order to receive the best, most-up-date advice before getting your project underway. With the right structure and timely advice it’ll be much easier to maximise your claim from the outset.
When you submit your VGTR application, HMRC will need to easily understand all the reasons behind the amount you’re looking to claim. Make sure the documentation and analysis you supply is thorough, but is also laid out in such a way that clearly defines your key areas of expenditure. Carefully make sure you aren't attempting to claim for something that is not eligible for VGTR, and that your numbers all add up correctly. Forgetting something, trying to hide certain details, or not being clear with your language can mean a real problem for the HMRC officer at the other end who has to read it. Not only can this lead to frustration all round, but HMRC could well have further questions which will delay your payment substantially.
Although the application process for VGTR is designed to be relatively straight-forward, the devil, as they say, is in the detail. If you manage to miss a question or not quite answer it correctly, then the quality of your application is likely to suffer.
Without a VGTR specialist to guide you, it's really easy to under-claim and therefore lose out on cash that you could be ploughing back into your company. Specialists like us at Myriad Associates have a strong understanding of what can, and cannot, be claimed for. Essentially, VGTR is not quite the same as R&D Tax Credits, which for video games development is only claimable against staff costs. It's much more versatile than that, but general accountants have a very broad remit and may not fully realise all of the relief’s intricacies specifically.
We really can’t emphasis this point enough; using a VGTR tax advisor really can be fundamental to your application’s success. However, this doesn't mean you should give your accountant the elbow in favour of a VGTR specialist - instead, they must work together. As VGTR is a relief, it should be treated as an additional element added on to your normal tax claims and year-end accounts. Specialists at Myriad Associates will deal exclusively with your VGTR claim, leaving your accountant free to deal with everything else. It’s not a case of choosing one or the other.
In order for your company’s activities to be eligible for the VGTR, it must pass the BFI’s Cultural Test and gain a certificate to prove this. There are still many misconceptions surrounding the Cultural Test, but the truth is that if you’re a UK-based company that’s designing a game in the UK, then the test is very difficult to fail.
The checklist works by assigning points based on how the game's creators, content and design fits in with British or European culture. In order to pass, a game must achieve a minimum of 16 points. However, four points are awarded simply because the video game is in English (or another indigenous language like Welsh or Gallic), with another two awarded for performing 50%+ of the conceptual design/programming/storyboarding or development in the UK. So as you can see, picking up the minimum 16 points is relatively easy.
Developing video games can be a costly business, and investment is required not just at the beginning of a project but all the way through to testing and beyond. Whilst VGTR provides a very useful boost when it comes to financing your project, additional external investment will very likely be required at various points along the way. Applying for and receiving VGTR not only offers an essential cash injection, it can make your project much more attractive to potential investors too. Private investors in particular will see that you have your eye on the ball regarding funding streams available, and that your company is serious about making the video game a success.
Myriad Associates is a leading specialist advisor in UK Video Games Tax Relief with years of experience behind us. We have delivered hundreds of VGTR claims on behalf of a massive range of UK gaming organisations, and are proud of our 100% success record. With our unique set of VGTR templates and broad expertise, we will support you in maximising your VGTR claim in a quick and hassle-free manner.
If you would like a chat with our friendly team, call us on 0207 118 6045 or you can use our contact form and we’ll get back to you.