Financial Supports For The Video Games Industry
Don’t let your clients miss out
The UK is the world’s fifth largest video game market in the world. The country boasts some incredible talent too, working across all games technologies from consoles to mobiles to AI and VR. It’s an essential part of the British economy, bringing in many millions of pounds each year.
Video gaming is also a very exciting and popular market to be in. It appeals to those with a deep passion for the sector, presenting some fantastic opportunities for anyone with an entrepreneurial spirit and creative flair. However, getting together the financing to set up and run a video games company can be notoriously difficult.
If any of your clients work in the video gaming sector, including software and apps, then make sure they’re aware of the financial help available to them in these increasingly challenging times.
What are the main financing options for businesses in the video games industry?
There are several important ways in which companies working in this sector can gain the funding they need. They include:
These are perhaps suited to games companies looking for smaller amounts, say of around £5000 upwards. However, lenders will still need to see evidence of the ability to repay, and many will not lend to companies looking to borrow more than one month’s turnover.
With a secured loan, the lender will require some security in case of non-payment. This would typically be in the form of businesses or personal assets.
Although secured loans aren’t suitable for everyone, they are a good way to borrow particularly large amounts of money - £250,000 or more for instance.
Grant funding of various types is also available, and is a particularly popular option as obviously grants don’t need to be repaid.
The UK Games Fund works to stimulate growth in the industry by supporting companies to innovate, diversify and grow. The fund also offers additional assistance, by helping companies to access expertise, training and networking opportunities.
See the UK Games Fund website for more information.
Video Games Tax Relief
The Video Games Development tax relief has been offered by the government for several years and forms part of the UK's system of Creative industries tax reliefs. However, despite the fact that it can mean a highly valuable cash injection specifically for UK video games companies, a large number have still never heard of it.
Essentially, VGTR is a tax relief that games production companies can claim in relation to expenditure they’ve incurred in creating UK video games. Companies can either receive the relief as a proportional deduction in their Corporation Tax, or as a repayable tax credit.
So what types of video games are eligible for the relief?
Video games must be intended for the supply to the general public. They must also pass the BFI’s Cultural Test.
Additionally, at least 25% of the game’s core expenditure must also have been incurred on goods and services that have come from inside the European Economic Area (EEA).
Is there anything that’s excluded?
Yes. VGTR cannot be claimed in respect of video games that promote gambling, or that have been created for the purposes of advertising or promotion.
What work might a video games development company (VGDC) have completed to be eligible?
A VGDC may have been:
- Responsible for the design, production and testing of a video game
- A key player in the planning and decision-making process when the video game was being designed, produced and tested
- Responsible for the negotiation of contracts, as well as the payment for rights and other goods or services in relation to the video game.
Note that subcontractors are not typically considered to be VGDCs.
Only "core expenditure" will be eligible for VGTR, so this might be the design, production and testing of the game for instance. Expenditure that will be excluded includes activities like debugging and carrying out maintenance on a game that has already been completed.
Any costs that relate to games hardware, as well as those concerning the advertising and marketing of a completed video game are also not covered by the relief.
It’s also worth noting that no relief can be claimed for costs which are also eligible to attract R&D Tax Credits.
I believe the above applies to one or more of my clients. What’s the best course of action?
Applying for any kind of R&D tax relief or grant, including VGTR, is not always a straightforward process. The legal guidance is regularly updated, and there are many loopholes regarding how to account for applicable expenditure and how to avoid problems with HMRC. Additionally, it’s all too easy to under-claim too, meaning your client could easily miss out on many thousands of pounds of much needed cash.
With this in mind, it is very strongly recommended that accountants work alongside an accredited, expert R&D tax consultancy like us at Myriad Associates (developers of the Tax Cloud). We only deal with R&D tax relief, grants and other innovation-related funding, so you can rest assured we’re not interested in poaching your clients! We simply want to work with you to offer the most comprehensive service possible.
How the Tax Cloud portal works
The Tax Cloud portal has a specific area for accountants where you can calculate and put together a fully maximised R&D claim on behalf of your clients. It’s a more ‘hands-off’ service than our traditional consultancy offering, so it’s ideal for those with more straight forward tax affairs who are looking for outstanding value for money.
Going it alone could mean your client misses out on they money they’re rightfully owed, or lead to issues with HMRC. Neither of these would do your firm any favours!