What is video game tax relief?
VGTR is a tax incentive designed specifically for UK businesses that make video games. It returns up to 20% of a company's spend on their game, either as cash from the government or as a Corporation Tax relief.
Many conditions apply, but in principle the game needs to be certified as culturally 'British'. Currently, at least 25% of expenditure on producing and developing the game must have been spent within the European Economic Area (EEA).
To be certified as British, the game needs to score at least 16 out of 31 points on the British Film Institute's 'Cultural Test'. The test itself isn't just for video games - it also applies to British films, TV programmes, and animations. If your game qualifies, you can start the VGTR application process.
For accounting periods starting after 1 January 2024, the headline Video Games Expenditure Credit (VGEC) rate will increase to 34%. As is often the case with headlines, this doesn't provide the whole picture. For profitable businesses, paying tax at the new main rate of corporation tax of 25%, their benefit will increase from 16% to 25.5%. For loss making businesses, it'll increase from 20% to 25.5%
However, one significant change to the scheme is that European Economic Area (EEA) expenditure will be excluded from the qualifying costs of the VGEC. Only expenditure incurred on goods or services used or consumed in the UK will be allowable.
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How are the VGTR and R&D Tax Relief schemes different?
Both schemes are intended to encourage work and investment in the UK, but as the name implies VGTR specifically supports the British video gaming industry.
Some differences with VGTR, compared to R&D Tax Relief, are:
It's not currently possible to claim both VGTR and R&D Tax Relief for the same game, project, or expenditure. So putting in the right claim, with all the relevant information, gives you the best chance of success.
There may be times when you're technically eligible for both types of tax relief. The specifics of your company and activities need to be carefully considered, to determine which scheme is the better one to apply for. For example, if your business is an SME working primarily in innovation then an R&D Tax Relief claim might be more appropriate and provide larger returns.
We have substantial experience of video game claims, so we run client interviews and meetings more efficiently. Our team reviews the company's work to determine if it is eligible for VGTR or R&D Tax Relief, and which scheme should provide the most overall benefit. We won't bombard you with information requests, and if you have any questions then we will make sure that we respond as simply and clearly as possible.
Our highly experienced team knows the BFI's certification rules inside and out. They will prepare and submit the application on your behalf, saving you considerable time and effort, and will work with the BFI to ensure the game is certified. An accountant's report is also needed for certain sections of the application form, and we'll obtain those documents for you as a part of the process.
Leave it to us to compile the video game tax calculations, for your accountant to incorporate into your company tax return. We will handle any questions from HMRC about the claim, to ensure that the application isn't rejected or delayed and that you receive the full benefit available. This can reach as much as £200 for each £1000 spent on the game, so it's worth doing properly.