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How to qualify for UK Video Games Tax Relief

video game developers tax relief

Video Games Tax Relief (VGTR)

Did you know that over 95% of video game companies in the UK are small to medium-sized businesses?

So what tax relief is available for those limited companies striving to fill our ever-growing appetite for computer games?

British companies developing video games have been able to claim tax relief of up to 25% on their production costs since April 2014. 

HMRC have criteria in place and the system is easy to navigate. Companies are entitled to claim relief as long as;

  • the video game is British
  • the video game is intended for supply
  • at least 25% of core expenditure is incurred on goods or services that are provided from within the European Economic Area (EEA)

If your company qualifies to claim to VGTR your company is also entitled to:

  • an additional deduction in computing their taxable profits
  • where that additional deduction results in a loss, certain losses incurred on the video game by the video game development company can be offset against profits or surrendered in return for a cash payment (this is the “tax credit”).

Both the additional deduction and the payable credit are calculated on the basis of EEA core expenditure up to a maximum of 80% of the total core expenditure by the video games company. Core expenditure is expenditure on pre-development, principal photography and post-development.

In addition, some video games development companies may be carrying on research and development and may have claimed Research and Development (R&D) Relief in the past.

Currently, if you are a small or medium-sized firm, who claims R&D relief, you can’t claim any other state aid reliefs (including video games tax relief and grants). This means that if a video games development company chooses to claim VGTR any R&D within a project wouldn’t qualify for R&D relief under the SME scheme.

(For large companies who carry out R&D and claim under the large scheme, the rules are different.)

If you are a gaming development business check out your tax relief situation with your accountant and make sure you minimise your tax situation – and maximise profits. We always advise that you get specific tax advice early so you get the maximum benefit.

You can read the Norfolk Tech Journal here, or keep up to date with Norfolk Developers here.

You can follow the link here to TIGA – TIGA’s vision is to make the UK the best place in the world to do games business. They do this through Government lobbying. TIGA is the non-profit trade association representing the UK’s games industry. Members include independent games developers, in-house publisher-owned developers, outsourcing companies, technology businesses and universities.

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