A Brief Guide to the Essentials of Video Games Tax Relief

The UK Video Games Industry is now worth an incredible £5.89 billion and is one of the most innovative sectors on the planet. Video Games Tax Relief (VGTR) is a scheme launched by the government to support employment and investment in the industry, in addition to helping cut costs, reduce risk and get ahead.

What is Video Games Tax Relief and who can claim it?

Video Games Tax Relief offers UK companies some extra financial support to develop video games, whether download-only or physical content. It is also broadly used in conjunction with other tax reliefs in existence available for various creative industries, including animation and high-end TV and film production. Tax relief can only be used for core expenditure, which includes aspects such as design, production and testing of video games.

How much is VGTR worth?

The value of the Video Games Tax Relief for a video game which has been entirely developed in the UK or the European Economic Area (EEA) is granted at 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). However, it excludes maintenance and debugging costs as well as the costs involved in designing the original concept. As an example, if a game’s qualifying spend is £1m, with all costs incurred within the EEA, the relief in terms of value will be £200,000 (20% of £1m).

If the video game makes a loss, claimants can receive a cash payment from HMRC at a rate of 25%.

How can you maximise the value of VGTR?

It’s worth getting professional advice from a VGTR specialist like us so you can maximise the amount of relief your company receives. With the help of experienced advisers who are clued up in the finer details of VGTR rules and who can deal with HMRC (whose rules are not always obvious), there’s a good chance your company could obtain more relief than originally thought.

Myriad Associates are specialists in this area with years of experience at hand to assist with any aspect of VGTR. Contact us on 0207 118 6045 or use our contact us page to speak to one of our VGTR experts.

How do you know if your game or studio qualifies for VGTR? 

A company is likely to be eligible for Video Games Tax Relief when the below criteria are met:

• Claims must be made by a company. Partnerships, individuals and Limited Liability Partnerships are not able to claim. The company must be a ‘video games development company’ (VGDC)
• UK corporation tax must be paid by the VGDC

The company must be involved directly with the production of the video game. It must:

• Have responsibility for designing, producing and testing the game
• Have active involvement in the decision making during this process
• Directly pay for the goods and services related to the game, including those which are contracted

There can only be one Video Games Development Company per game. There are a range of factors to think about when deciding whether to set up a special purpose-built company for each separate game or whether to simply use an existing entity. Generally, the latter option is most appropriate as it is less expensive and less hassle. The video game must also be intended for distribution to the general public.

It's also worth knowing that VGTR can in fact be claimed before your game is finished so you don’t have to wait until the very end. This can make a huge and positive difference to cash flow, especially for smaller developers.

Additionally, it is essential that the video game passes a Cultural Test. Administered by the British Film Institute (BFI), the test certifies that the video game is a British production. It’s a points-based test that helpfully has a low pass threshold (only 16 out of 31 points are needed), so it’s easy for games to be accepted.

Bear in mind that there are certain times of games that won’t be eligible for VGTR. These include any that contain extreme or pornographic material. Any games designed for marketing or promotional purposes, or for gambling, will also not qualify.

Is Video Games Tax Relief only aimed at big spenders?

No, not at all. In fact Video Games Tax Relief is aimed at all production companies large and small, new or well established. No minimum spend threshold has been stipulated, meaning it’s not just about big, expensive films and games. Companies looking to develop low budget films and games can also qualify for the VGTR.

Can you claim both VGTR and R&D tax relief?

The short answer is yes - in many cases it is possible to claim both VGTR and R&D tax relief. However, it’s not a straight-forward process which is why companies looking to do this could get in touch.

How do I apply for Video Games Tax Relief?

If you’re interested in finding out more and making an application for VGTR, why not take a look at our Video Games Tax Relief webpage? Packed full of information about what you need to include in your submission, how to pass the Cultural Test and more, it’s designed to give your business the best chance of being accepted.

Why choose Myriad Associates?

At Myriad Associates we know that navigating the process of applying for Video Games Tax Relief can be less than simple. Getting to grips with the finer details and finding the right answers is a time-consuming project for any business or accountant.

We are experts in our field and our team of friendly tax professionals are on hand to guide you through the process and answer any questions you may have along the way.

Call us today on 0207 118 6045 and speak to one of our VGTR experts. We’ll be pleased to discuss your business’ individual circumstances and requirements. Alternatively, drop us a note using our contact page and we’ll call you back.