British companies developing video games will be able to claim tax relief of up to 25% on their production costs from this week.
The video game tax relief legislation, which came into force officially on 1 April 2014 can now be harnessed to the full by British producers.
Companies are entitled to claim relief as long as the video game is British, intended for supply and at least 25% of the core expenditure is incurred provided from within the European Economic Area.
Over 95% of video game companies in the UK are small to medium sized businesses.
The campaign to bring such a relief into the UK has been ongoing for over seven years, according to chief executive of games industry trade body TIGA.
"It's a long campaign, but we have finally got there," he said, "It’s a good measure that allows the UK games industry to compete on a more level playing field."
If it qualifies, the company is also entitled to an additional deduction in computing taxable profits. In addition, where that additional deduction results in a loss, it is entitled to surrender losses for a payable tax credit
According to HMRC, some video games development companies may be carrying on research and development (R&D) or may have claimed R&D tax relief in the past.
"It's important to note that where SME R&D tax relief is claimed on a project, that project cannot claim for any other State Aid reliefs," said the Revenue.
If a company choses to claim tax relief, any R&D work claimed within the project cannot qualify for any other state aid relief under the SME scheme. However, rules for large companies are different.
The relief is similar to the film tax relief model and administered by the British Film Industry (BFI) on the government's behalf.
According to the BFI, a number of successful applications for the relief have already been approved.