How To Claim VGTR Before Your Game Is Complete

This article was originally published in 2019. This information is still correct for the VGTR scheme.  However, it is worth noting that in 2023, the government announced its plan to transition to a new Video Game Expenditure Credit (VGEC) to replace the existing VGTR scheme.

VGTR remains available for games in development prior to 1^st April 2024 and closes from 1^st April 2027.  Games that have previously claimed VGTR, may be eligible for VGEC.

Video Games Tax Relief (VGTR) is a cumulative scheme, allowing you to claim for the entirety of your game’s development in the final accounting period, even if you’ve been working on your game for ten years (looking at you, GTA 6!).

However, many companies may still want to benefit from the scheme during development, giving them an extra finance boost each year to keep development going.

What do you need to claim VGTR?

There are some basic requirements for all claims for VGTR, final or otherwise.

VGTR is claimed as part of your company’s Corporation tax return (CT600), which you file with HMRC. You must produce a profit and loss account for each video game, as each must be reported to HMRC as a separate trade.

You’ll also need to prepare an Additional Information Form detailing your game’s information and apply for a certificate from BFI proving your game is ‘British’.

If your game is still in development but you want to benefit from VGTR, you can apply for an interim certificate from BFI. Interim certificates are valid for 3 years. If your game is still in development beyond this period, you can reapply for an interim certificate.

When your game finally completes, you will need to reapply to BFI for a final certificate.

Claiming with Special Purpose Vehicles (SPVs)

For games that are incomplete, claiming VGTR can lead to tricky cashflow problems.

Without careful planning, some companies find their credit trapped until their production is completed. This delay can last multiple accounting periods, leaving your cash credit locked away when you need it most.

This is because each game must be reported as a separate trade. While a game is still in development, it is almost inevitable that it will be loss making as little or no income has yet come in. However, until the game is completed, any losses arising from that game cannot be offset against other trades.

As a result, where an interim claim is made on an incomplete game, those losses become effectively trapped in that accounting period.

To avoid this, we recommend that you consider setting up a type of subsidiary company known as a Special Purpose Vehicle (SPV) for each game you develop. This is a special legal entity that allows you to keep all costs for a single production in a single structure. Besides simplifying HMRC reporting, the SPV allows you to surrender your losses, access your credit and better fund your development.

How does an SPV structure work in practice?

The mechanics of an SPV structure typically follow a clear seven-step process:

1. Parent provides working capital loan to the video game development company (SPV) up to the expected VGTR amount. This gives the SPV the autonomy it needs to operate independently.
2. Parent transfers any management and services costs to the SPV. These transfers must be at arm's length under transfer pricing rules.
3. SPV pays staff, contractors, and suppliers using the working capital loan. The SPV is now handling the day-to-day production expenses.
4. SPV invoices parent a commissioning fee. The parent is commissioning the game, so the SPV raises an invoice for the work. This commissioning fee balances out the costs incurred, bringing the SPV to break-even.
5. VGTR payment to SPV is received from HMRC once you make the claim through your corporation tax return.
6. Working capital loan repaid to parent by SPV with the VGTR payment from HMRC.
7. Any game income remains with parent because the SPV's income is generated from the commissioning fee charged to the parent.

This structure ensures the SPV maintains real economic activity. It's making key decisions, handling contracts, and taking on risk, which is exactly what HMRC requires for you to qualify for VGTR.

Making your claim

For companies making claims for games with a long period of development, claiming VGTR in the interim makes a lot of sense. However, if your game is nearly finished, we suggest you wait until then before making your claim. This will reduce significant duplication of work.

Get in touch with our team for further guidance on SPVs and how to make your VGTR claim.