How eSports is changing the gaming industry for the better

eSports is the term used to describe competitive computer gaming, and it’s increasingly involving professional computer game players. eSports is just the latest version of our continuing obsession with competitive achievement, which fuels industries and creates commercial associations with all kinds of sports, from tennis to football, and from the smallest local competition to the greatest global championship.

Latest statistics show the esports sector has grown at an annual average rate of 8.5% between 2016 and 2019. Despite some debate amongst analysts and experts, it has come to be recognised as a fully-fledged sport.

Clearly, eSports is still in its infancy and the competitions and titles that exist now will probably change in the future. Advances in virtual reality technologies mean that both creators and consumers are about to embark on a more fully immersive and interactive experience than ever before. We may well see fans taking part in tournaments remotely across the globe in collaboration with their favourite professional players, or see social media influence how tournaments are scored and designed.

Money is no object

eSports is certainly no ‘poor relation’ to conventional sports. With billionaire owners, multi-million-pound player wages, and billion-pound sponsorship deals dominating the sports pages each week, it is fair to assume that similar financial issues will accompany the advance of eSports. However, in comparison to some traditional sports eSports have an exceptionally close connection with money and marketing.

Knowing the high costs of game development, it’s worth knowing that UK game developers that they can benefit from Video Games Tax Relief (VGTR). Despite the fact that most eSport tournaments take place online with participants scattered across the globe, now is a great time for UK game studios, both start-ups and established companies, to create new innovative gaming titles, which could easily amass a large community of competitive followers. There’s still much work to be done if the UK games industry wants to take a significant role in eSports, but all the signs are very positive for developers, gamers, and investors. The extra financial incentive from VGTR and R&D Tax credits could really make a difference, too.

Worth up to 20% of the core production costs of a game it’s not money to be sniffed at either. In fact, data from Tax Watch UK shows that VGTR has seen a 48% increase between 2020 and 2021. Previously expected to cost £35 million a year, VGTR cost £180 million in the 12 months to March 2021.

What is Video Games Tax Relief?

Video Games Tax Relief (VGTR) is part of a suite of UK Creative Sector Tax Reliefs, allowing eligible companies to claim a payable cash tax credit on qualifying expenditure.

Video games will attract the relief if they are intended to be supplied to the general public and if they pass the BFI’s Cultural Test for Video Games.  At least 25% of the total “core” expenditure on the video game must also have been incurred in the European Economic Area (EEA).

There are certain exclusions though. Any game that was developed for the purposes of advertising, promotion or gambling will not be eligible for VGTR.

Which companies can claim VGTR?

In relation to a specific video game, only the company that is deemed the Video Games Development Company (VGDC) in relation to the game in question can make a claim for VGTR. Partnerships, limited liability partnerships and individuals are excluded.

To be classed as the VGDC, a company must have a liability to pay UK Corporation Tax. It must also have been:

• Actively involved in planning and producing the game, as well as in the decision making process throughout
• Be responsible for designing, developing and testing the video game; and
• Negotiate directly with any third parties around contacts and payments for goods, services and rights that relate to the video game.

Only one VGDC can exist for each video game being claimed for. If there is more than one company that will qualify to be a VGDC, the one which is most directly involved with the qualifying activities should be treated as the VGDC.

Need some clarity on this or have a question? Our team of specialist VGTR experts will be pleased to help. Get in touch.

And R&D Tax Credits?

As mentioned, even when claiming VGTR, it’s very possible that games companies can also claim R&D Tax Credits.

Research and development (R&D) Tax Credits are a government tax relief that’s designed to incentivise UK companies to innovate. Companies that have therefore invested in the development of new products, processes or services that involved some degree of technical or scientific experimentation are likely to qualify.

Again, it’s extremely generous, allowing for as much as 33p to be claimed back for every £1 of eligible R&D expenditure.

What costs can be covered by R&D Tax Credits?

When you work with our team of specialists we’ll analyse all your R&D costs in detail to calculate how much your claim is worth.

As a guide however, claimable costs typically include:

• Staff costs such as wages and expenses
• Payments and costs relating to contractors, freelancers and other Externally Provided Workers
• Payments to volunteers for clinical trials
• Certain types of software
• Consumables and materials used up in the R&D process

This is by no means an exhaustive list, and it’s easy to over or under claim. That’s why many (savvy) companies use the services of a professional R&D tax claims consultancy like Myriad, as we can soon draw out the exact costs within your project that will qualify.

Think your company could claim VGTR and/or R&D Tax Credits

Understanding whether your company and your project could make a claim - and how much - can be a challenge to say the least.

Why not discuss your innovative projects with our experts today. We’ll soon be able to tell you exactly what the situation is, and - if you do have a claim - there’s nothing to pay up front. So nothing to lose!

Call 0207 118 6045 or send us a message.