What is Video Games Tax Relief (VGTR)?
The Video Games Tax Relief (VGTR) is a tax incentive that can be claimed by the developers of video games in order to gain tax relief or a cash payment against the costs of video game development. Part of the eight creative industry tax reliefs, this is designed specifically for video game developers for costs incurred after 1 April 2014.
Who and what qualifies for Video Games Tax Relief?
Your company may be eligible to claim VGTR if the game that is being developed is certified as British by the British Film Institute, is intended to be supplied to the general public and has at least 25% of expenditure on designing, producing and testing the game provided in the European Economic Area.
Additionally, your company must directly negotiate, contract and pay for rights, goods and services, as well as be actively engaged in decision-making and planning.
The game that is being developed can be for any platform, including games consoles, games for PCs and games for smartphones, tablets and other mobile devices.
How to maximise the value of the VGTR
In order to maximise your VGTR claim on your video game, it is essential to take advice from specialist tax experts. The process can be complex and confusing if you have not had specific experience claiming VGTR in the past. At Cooden Tax, we are a team of experts with extensive experience dealing with HMRC – we would be happy to help you maximise your claim.
An example VGTR calculation
If your company spent £500,000 developing a video game, and 90% of the costs are core expenditure all spent in the EEA. The deduction would be 100% of the lower amount of:
- Core expenditure spent in the EEA – £450,000
- 80% of core expenditure related to the game – £360,000
How do you claim for Video Games Tax Relief?
You make your claim for VGTR when you file a Company Tax Return with HMRC. At this time, it is up to you to calculate the level of deduction due to you, as well as any payable credit that you are due.
As a part of your claim, you must provide your British cultural certificate from the BFI, as well as statements detailing the core expenditure split by EEA and non-EEA costs, and a breakdown of expenditure by category.
What is the Video Games Tax Relief cultural test?
In order to qualify for tax relief, your video game must be certified as British by the BFI by passing a cultural test. This test looks at a number of criteria including where the game is set, the lead characters, the dialogue language, as well as where the conceptional development, storyboarding, programming, design, music and recording work took place, as well as personnel.
If your game passes the requirements by achieving 16 of a possible 31 points, the BFI will issue:
- an interim certificate for uncompleted work
- a final certificate where production has finished
How long does it take for BFI to process a Cultural Test application and issue a certificate?
When can you claim for VGTR?
It is possible to make, amend or withdraw any claim for VGTR up to one year after the company’s filing date. However, in some circumstances, HMRC may agree to accept late claims.
Is there a minimum or maximum on qualifying spend?
There is no minimum or maximum limit on qualifying spend – video games companies of all sizes can claim.
35K Saved from R&D Tax Relief
“We saved £35k for activities we had not realised were eligible for R&D tax relief. Simon is very knowledgeable in preparing and filing claims that provide everything the authorities need. He emphasises the important things to score on their assessments and concisely argues the point!”
How We Help
At Cooden Tax Consulting we help limited companies that are advancing the state of their industry and investing in innovation to maximise the use of the tax incentives available. Successful claims can be received as a cash payment, reduce corporation tax, or increase taxable losses.