Video Games Tax Relief

If you want to claim Video Games Tax Relief, your video game must be certified as British. To receive this certification, you must pass the British Film Institute (BFI) cultural test.

To pass the BFI cultural test, you must complete an online application form for each video game you want to claim VGTR for. The BFI will assess your application and award points based on the cultural content of the game, its cultural contribution, its cultural hubs, and its cultural practitioners. To pass the test, each video game must score at least 16 out of a possible 31 points.

Myriad Associates employs BFI application specialists that can help you pass this test. Contact us for advice.  

The cultural test for video games is set out in The Cultural Test (Video Games) Regulation 2014 but for more information, read this.

In addition to completing an application form for each game, a Statutory Declaration to certify that the truth of the particulars in the application is also required.

The Statutory Declaration can be made before a practising solicitor, a general notary, a Justice of the Peace, or any other officer authorised by law to administer a statutory declaration under the Statutory Declaration Act 1835.

An Accountants report is required if an application for a final certificate relies upon points in Section C and/or Section D of the cultural test. The Accountant Report must be prepared by a person who is eligible for appointment as a company auditor under Section 1212 of the Companies Act 2006.

The BFI will normally issue a certificate within 28 days of the receipt of a fully completed application.

Delays may occur if application forms are not properly completed or need further information. If you need the certificate by a certain date, make sure you apply in good time and specify your deadline date on the application.

A Letter of Comfort: If you’re not yet ready to make a full cultural test application, you can submit a draft application and receive a Letter of Comfort from the BFI. This letter will state that the video game should pass the cultural test. A Letter of Comfort can’t be used to submit a VGTR claim to HMRC, but it is reassuring to have, and it can help you secure financing.

An Interim Certificate: You can apply for an Interim Certificate if your video game is still in production. An Interim Certificate will be issued once the BFI and the Department of Culture, Media and Sport (DCMS) are satisfied that your video game will pass the cultural test, based on the proposals set out in your application.

A Final Certificate: A Final Certificate, which proves your game is British, will only be issued after your video game is finished and is ready for public consumption. Applications for a final certificate should, therefore, not be submitted before the video game has been completed. 

The Accountant's Report is required when an application is claiming points in Section C and/or Section D.

The purpose of the Accountant's report is to verify the total and UK expenditure of the work in Section C and the nationality or residence of all persons in Section D. 

The Accountant's Report must be prepared by a person who is eligible for appointment as a company auditor under section 1212 of the Companies Act 2006.

An Accountants Report can cost between £500 and £2,000 per application, depending on the video game costs and the number of applications you’re submitting.

The BFI cultural test regulations require you to make a statutory declaration which states that the information you’ve given in your application is true.

A statutory declaration is required for both the Interim and Final certifications. 

The statutory declaration must be made either before a practising solicitor, general notary, Justice of the Peace or an officer authorised by law to administer a statutory declaration under the Statutory Declaration Act 1835.

You can apply for both Video Games Tax Relief and R&D Tax Credits. However, you may only claim a given project cost against one of these schemes, not both.

In certain cases, you can maximise your overall tax relief by applying to both schemes and claiming specific costs against each scheme on a project-by-project basis.

Myriad Associates can help you with this. To maximise your tax relief, we’ll study your projects, assess your costs and establish which project costs to claim under which scheme. Contact us for advice.

Non-core video game expenditure relates to initial design stage activities or commercial exploitation of the video game. 

For example, initial concept artwork used as part of the process of establishing the commercial viability is not core expenditure and not eligible for VGTR.  Advertising a video game isn’t classed as development expenditure and is not, therefore, core expenditure.

Ineligible expenditure includes entertaining, publicity, promotion, audit fees, interest, completion bonds and other forms of insurance.

The amount of Video Games Tax Relief (VGTR) to which a Video Games Development Company (VGDC) is entitled in respect of a video game trade is determined by the amount of core expenditure which is also European Economic Area (EEA) expenditure.

Where a video game is partly produced in the EEA and partly outside of the EEA it will follow that some goods and services may be non-EEA. In such cases, it will be necessary to make an apportionment of the relevant core expenditure between EEA and non-EEA expenditure.

This applies in the case of goods and services provided throughout core expenditure stages. That is, it applies to expenditure incurred during pre-development, production and post-development.

The method for making an apportionment is not fixed and can be determined on a case-by-case basis. The key criterion is that it must be done on a fair and reasonable basis.

There will often be more than one ‘fair and reasonable’ basis. The requirement is not that the apportionment must be made using the fairest and most reasonable basis, but simply that it must be made on a basis that is fair and reasonable.

Contact the VGTR team today

Video Games Tax Relief (VGTR), also known as the UK Games Tax Relief Scheme, is a creative industry tax relief incentive, funded by the UK government.

VGTR supports UK game developers by offering them a tax rebate against the money they spend on the design, production and testing of a new video game.

Video Games Tax Relief is worth up to 20% of the core production costs of a game. Game developers can claim VGTR on whichever is lower:

• 80% of the total core expenditure
• The actual EEA core expenditure incurred

If the game is profitable, the Video Game Tax Relief can be used to reduce a Corporation Tax bill. If the video game makes a loss, claimants can receive a cash payment from HMRC at a rate of 25%.

If you meet the above VGTR criteria, and your video game can be played on any one of the following devices, you could be entitled to Video Games Tax Relief:

• PC’s
• Televisions
• Smartphones or other mobile devices
• Tablets
• Video consoles or other handheld portable devices

Video Games Tax Relief is claimed as part of the Company Tax Return (CT600) that is filed with HMRC.

To make a VGTR claim, you’ll need to be registered as a company and have the following documents:

• Your BFI cultural certificate to prove your game qualifies as “British”.
• Statements that show your core expenditure, broken down by category and by EEA and non-EEA spending.
• A profit and loss account for each video game produced (each game needs to be reported to HMRC as a separate trade).

You’ll need to calculate if your video game has made a profit or a loss and determine whether your VGTR claim should be surrendered as a loss for a cash repayment or used to reduce your tax bill.

HMRC has a specific approach for calculating the taxable profit and loss of a Video Games Development Company (VGDC). There are restrictions for the way losses can be used and these will vary depending on if the video game is finished and trade has ceased.

To qualify for VGTR, you need to meet the following criteria:

1. Your company must be responsible for most of the planning, designing, developing, testing, and production of the video game and, therefore, be known as the Video Games Development Company (VGDC).
2. The video game must be intended for commercial release, but not created for advertising, promotion, or gambling (within the meaning of the Gambling Act 2005) purposes.
3. The video game should qualify as “British” under the British Film Institute (BFI) Video Games Cultural Test.
4. At least 25% of your video game production costs must have been incurred within the European Economic Area (EEA).