VGEC vs VGTR: What’s Changing for UK Video Games Tax Support

The UK's generous tax support for video game development is transitioning from Video Games Tax Relief to the newer Video Games Expenditure Credit

The UK continues to provide generous tax support for video game development, but it is transitioning from Video Games Tax Relief (VGTR) to the newer Video Games Expenditure Credit (VGEC).

This change is not just a rebrand. The rules, the qualifying tests, and the claim mechanics differ in ways that affect both cashflow and compliance. For many studios, the practical question is now: ‘Which regime applies to our production, and what should we be doing differently as VGEC becomes the norm?’

The transition: when VGEC takes over

The move to VGEC has been phased. Although there has been a period where switching has been voluntary for some productions, VGEC becomes mandatory for new productions from 1 April 2025, and then mandatory for all productions from 1 April 2027, when VGTR ends.

Where an accounting period straddles 1 January 2024, when VGEC first became available, expenditure may need to be apportioned on transition.

How the qualifying rules differ

The most significant conceptual change is the move from a “European” spend focus under VGTR to a more explicitly “UK” spend focus under VGEC. Under VGEC, a game must be intended for supply, it must obtain British certification through the BFI cultural test, and it must meet the UK expenditure requirement.

That UK expenditure requirement is frequently the deciding factor. Broadly, at least 10% of core expenditure must be UK expenditure. The calculation is structured by reference to expenditure across the current and earlier periods, which in practice means accurate cumulative cost tracking matters more than many studios expect when they first encounter VGEC.

UK expenditure is determined by where goods and services are used or consumed, and costs can need to be apportioned on a fair and reasonable basis.

One feature that makes VGEC particularly important to manage carefully is what happens if the UK expenditure condition is not met in any accounting period. In that situation, the game can cease to qualify, and earlier relief claimed in pre-completion periods may need to be unwound by amending prior returns.

This is why forecasting and tracking UK spend is not just “nice to have” under VGEC, it can be central to controlling risk.

How the benefit is delivered

The way relief is delivered also changes between the regimes. VGEC works through a defined, step-based calculation and the headline point is that the credit is 34% of qualifying expenditure for the period.

By contrast, VGTR operated through an enhanced deduction approach and, where this created or increased a loss, a payable credit could be generated by surrendering losses at a set rate.

Although many of the “what is a qualifying cost?” questions feel familiar across both regimes, the commercial experience of the relief, particularly how it shows up in accounts and tax computations, can feel quite different under VGEC.

Administration and supporting evidence: what HMRC now expects

Whichever regime applies, claims are made through the company tax return, but the supporting requirements have increased. From 1 April 2024, claims require an additional information form with supporting evidence (including the cultural certificate) submitted through HMRC’s online process for creative industry relief claims.

How Alliotts can support studios under both regimes

Alliotts advises video game studios and publishers on VGTR and VGEC, with a focus on making claims efficient, defensible, and aligned with the way productions operate. This typically includes confirming which regime applies to each production and how the transition affects you, supporting the BFI cultural certification process, reviewing and mapping expenditure to the qualifying categories, helping model and track the UK expenditure requirement under VGEC, preparing the documentation required for submission, and supporting clients through HMRC queries where needed.

If you are assessing a claim or preparing for a move to VGEC, a short review of your production timeline, team and supplier locations, and development cost profile is usually enough to identify the key opportunities and the main risk areas early.

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