What is Video Games Tax Relief? Six Things You Need to Know
The UK is an international hub for the video games industry, and the Government recognises the contribution that this growing sector makes to the UK economy. So, a couple of years ago, in a move to help retain video games businesses and attract overseas investment, the Government widened its creative tax reliefs to include Video Games Tax Relief (VGTR).
However, many businesses we talk with have an understanding of VGTR but need advice on the in's and out's of how it works. I'm usually asked by developers to explain the mechanics of VGTR, how to go about applying for it and if they qualify. Here are my answers to six of the questions I'm most often asked:
1. Isn’t 25% tax relief available rather than 20%?
No, but this is a common misconception. A loss-making games company is entitled to a payable tax credit of 25% of its EEA qualifying spend on a game, subject to a maximum of 80% of all qualifying spend (whether incurred in the EEA or outside the EEA).
Let’s say a game has qualifying spend of £2m which is entirely spent in the EEA, the value of the relief will be £400,000, being 20% of £2million (25% of 80% of £2million).
2. Is there a cap on qualifying spend?
No, there is no limit on qualifying spend although there is a limit on sub-contracted costs of £1 million per game.
3. Is there a minimum spend threshold?
No, there is no minimum spend threshold as such but in order to qualify for the relief, at least 25% of the qualifying spend on the game must be on goods or services provided from within the EEA.
4. What is core expenditure?
Expenditure on the design, production and testing of the game is classed as core expenditure. Costs of designing the initial concept, debugging a completed game or maintenance are non-core and not eligible for the relief.
5. Is it true that VGTR can’t be claimed if an R&D claim has been made?
A company can apply for both VGTR and R&D relief however you may only make a claim for a particular cost against one of the schemes, not both. The relief cannot be claimed in respect of any expenditure that may qualify or has already qualified for R&D relief.
6. How long does a company have to make a claim?
A claim can be made up to 2 years from the end of a company’s accounting period. HMRC aim to make payment for claims or request further information within 28 days.
The BFI aim to respond to applications for certificates within 28 days
Often businesses are just too busy to do it themselves, so that's where we can take over the process and help make it happen. Ways our specialist team can help make your VGTR claim a success.
- We will identify your eligible games and core expenditure
- We will handle the certification process with BFI
- We will prepare your claim ensuring VGTR is maximised
- We will prepare your tax computation and tax return if you’d like us to
- We can also handle any ongoing enquiries from BFI and HMRC relating to your claim.
- Or we can simply provide your accountant with the information needed to make the claim in your company’s tax return.