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Can smartphone gaming apps attract VGTR?

Video Games Tax Relief (VGTR) can be claimed in respect of games developed for any platform, such as video game consoles, tablets, PCs and, yes, smartphone gaming apps.

Chris Dowsett

Manager, Tax Incentives UK & IE


5 minute read

Video Games Tax Relief (VGTR) can be claimed in respect of games developed for any platform, such as video game consoles, tablets, PCs and, yes, smartphone gaming apps. But what exactly is the scheme all about? Here we dig deeper into VGTR and how it can help smartphone app developers raise cash too.

About VGTR

Video Games Tax Relief is a relatively unknown tax incentive and yet for games developers it can be worth some serious money. Essentially, it’s a mechanism that allows studios to reduce the financial risk they take when developing a game in the UK by offering a rebate against production expenditure.

VGTR was first unveiled by the government in April 2014. The relief forms part of a wider package of financial assistance for businesses in the creative industry, including TV, film, animation and video games. HMRC administers the scheme, but it’s the British Film Institute (BFI) that manages the qualification process which includes the “Cultural Test”.

According to recent figures published by HMRC in July 2018, £108 million of VGTR was paid in response to 345 claims during the fiscal year 2017/18. Furthermore, between 2014 and 2018, there were 770 claims resulting in payouts totalling £227 million. The good news too is that even with Brexit looming over VGTR, the European Commission has confirmed that it will remain in place until the 31st March 2023 at the earliest.

Gaming app developers - don’t miss out!

How much VGTR relief a company can claim depends on whether the game has turned a profit or not. For profit-making games, the claim will be worth a maximum of 20% of the production costs. The amount is calculated based on either 80% of your core expenditure or your EEA spend, whichever figure is lower.

However, claims on loss-making games will be worth a 25% tax credit on the surrendered loss. This loss is calculated as either the eligible expenditure or the available loss, again whichever is less.

What are the main conditions of Video Games Tax Relief?

To be eligible to receive VGTR, a video games company needs to have taken majority responsibility for bringing about a game from planning to execution. This is essentially the designing, developing, testing and production of it. Additionally, a minimum of 25% of the qualifying costs must have been incurred in the European Economic Area.

What if more than one company works on the same project?

Only one company may apply for VGTR per game. This means if more than one company helped to bring the game to fruition, it will need to be ascertained which company made the greatest contribution. This company will then become the “Video Games Development Company” (VGDC), and will then become the VGTR applicant.

What is the video games Cultural Test, and will gaming apps need to pass it?

Yes, they will. Passing the BFI’s Cultural Test is a key requirement in qualifying for VGTR. If the game is not yet complete, or indeed not yet started, an interim certificate can be applied for which is then upgraded to a final certificate on completion.

As the name suggests, the Cultural Test examines the cultural aspects of a video game/gaming app, including its cultural contribution and context. Each criteria represents 1 point and there are 31 points in total, although only 16 points must be scored in order to pass. The test itself is divided into four sections, examining factors such as the setting of the story, the location where production took place and the nationality of the game’s main characters. Scores will be higher across all of these factors if the game contains facets of British culture, or cultural references regarding other EEA countries.

You can find out more about the Cultural Test on the BFI website.

Bear in mind

There are a couple of main caveats to the Video Games Tax Relief which you will need to take note of. They are:

  • Games or apps that have been designed for the purposes of promotional, advertising or gambling will not qualify for VGTR
  • A cap of £1 million exists in reference to sub-contracting costs on VGDC sub-contracts work

R&D Tax Relief or Video Games Tax Relief?

It is still possible for companies to apply for both Video Games Tax Relief and R&D Tax Credits. However, an individual project cost can only be attached to one of the schemes, not both. In certain cases it is possible to achieve maximum tax benefit overall by applying to both schemes, and this is done by attributing specific costs against either R&D Tax Credits or VGTR on a project-by-project basis.

When you work with Myriad Associates on your VGTR claim, we will look into your projects and assess the costs before advising you on which scheme to use or each cost. This will then help you in maximising your claim legally and effectively - after all, why risk under-claiming?

How the Myriad Associates team is on hand to help with all aspects of your VGTR claim

Myriad Associates is a leading expert consultancy in the field of UK tax relief for games developers. Turn to us when you’re putting together your VGTR claim for fast, professional advice before submitting it to HMRC.

Employing BFI application specialists, corporate tax experts and qualified cost accountants, you can rest assured you’re in good hands. As part of our service we will guide you through the BFI Cultural Test and make sure your VGTR claim is clear and accurate every step of the way.

Our easy to use templates mean your VGTR claim is maximised so your company receives the full relief it deserves. We can also offer a fixed fee or a percentage success fee to suit you.

Get in touch today using our contact us page now or call 0207 118 6045 - we're working as usual during the COVID-19 outbreak. Don’t forget to also see our VGTR and R&D Tax Credits pages for more information.

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