A Brief Guide to the Essentials of Video Games Tax Relief
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The Video Games Industry in the UK is booming and according to the TIGA Report of 2016 contributes around £1.25 billion to our GDP. Video Games Tax Relief (VGTR) is a scheme launched by the government to support employment and investment in this sector in addition to helping cut costs and risk. Claiming VGTR is an excellent way of enhancing a company’s competitive edge in a powerful global industry.
What is Video Games Tax Relief and who can claim it?
Video Games Tax Relief offers UK companies some extra financial support to develop video games, whether download-only or physical content. It is also broadly used in conjunction with other tax reliefs in existence available for various creative industries, including animation and high-end TV and film production. Tax relief can only be used for core expenditure, which includes aspects such as design, production and testing of video games.
Will VGTR be affected by Brexit?
At the moment we simply don’t know. Brexit has called many branches of government funding into question, and whilst there is no immediate appetite to withdraw Video Games Tax Relief it’s anyone’s guess what will happen in years to come. Brexit negotiations are still ongoing and of course we will update the Myriad Associates website with the latest information accordingly.
How much is VGTR worth?
The value of the Video Games Tax Relief for a video game which has been entirely developed in the UK or the European Economic Area (EEA) is granted at 20% of qualifying spend. In short, this refers to the amount of expenditure on everything from designing to testing the game (including DLC alongside other spending required after release). However, it excludes maintenance and debugging costs as well as the costs involved in designing the original concept. As an example, if a game’s qualifying spend is £1m, with all costs incurred within the EEA, the relief in terms of value will be £200,000 (20% of £1m).
How can you maximise the value of VGTR?
When it comes to maximising the value of the Video Games Tax Relief your company receives, it’s highly recommended and very worthwhile to seek expert advice around how to maximise it. With the aid of competent, experienced advisers who are clued up in the finer details of the latest VGTR rules and who can deal with HMRC (whose rules are not always obvious), there’s a good chance your company could obtain more VGTR than originally thought.
Myriad Associates are specialists in this area with years of experience at hand to assist with any aspect of VGTR. Contact us on 0207 118 6045 or use our contact us page to speak to one of our VGTR experts.
How do you know if your game or studio qualifies for VGTR?
A company is likely to be eligible for Video Games Tax Relief when the below criteria are met:
- Claims must be made by a company. Partnerships, individuals and Limited Liability Partnerships are not able to claim. The company must be a ‘video games development company’ (VGDC).
- UK corporation tax must be paid by the VGDC.
The company must be involved directly with the production of the video game. It must:
- have responsibility for designing, producing and testing the game
- have active involvement in the decision making during this process
- directly pay for the goods and services related to the game, including those which are contracted
There must only be one Video Games Development Company per game. There are a range of factors to think about when deciding whether to set up a special purpose-built company for each separate game or whether to simply use an existing entity. Generally, the latter option is most appropriate as it is less expensive and less hassle. The video game must also be intended for distribution to the general public. It's also important to note that VGTR can also be claimed before your game is complete.
Additionally, it is essential that the video game passes a Cultural Test. Administered by the British Film Institute (BFI), the test certifies that the video game is a British production. It’s a points-based test that helpfully has a low pass threshold (only 16 out of 31 points are needed), so it’s easy for games to be accepted. A simple overview of the BFI's Cultural Test can be useful to learn more.
If a video game falls foul of any mentioned exclusions, including games showing pornographic or extreme material or are primarily concerned with advertising or gambling, then successfully obtaining VGTR may not be possible.
Is Video Games Tax Relief only aimed at big spenders?
Video Games Tax Relief is aimed at all production companies large and small, new or well established. No minimum spend threshold has been stipulated, meaning it’s not just about big, expensive films and games. Companies looking to develop low budget films and games can also qualify for the VGTR.
Can you claim both VGTR and R&D tax relief?
The short answer is yes - possibly. It is possible to claim both VGTR and R&D tax relief.
How do I apply for Video Games Tax Relief?
If you’re interested in finding out more and making an application for VGTR, our informative e-book how to apply for Video Games Tax Relief is there to help. Packed full of information about what you need to include in your submission and how to pass the Cultural Test, it’s designed to give your business the best chance of being accepted.
Why choose Myriad Associates?
At Myriad Associates we know that navigating the process of applying for Video Games Tax Relief can be less than straightforward. Working out the finer details and finding the right answers is a time consuming project for any business or accountant.
We are experts in our field and our team of friendly tax professionals are on hand to guide you through the process and answer any questions you may have along the way.
Call us today on 0207 118 6045 or use our contact page & speak to one of our VGTR experts and we’ll be pleased to discuss your business’ individual circumstances and requirements