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Did you know that Video Games Tax Relief (VGTR) is a way for UK game developers to claim back money they spend making their games? VGTR can give developers a big discount on certain costs, which can then save them up to 20% in corporation tax. Even if they’re not making a profit, they can still get a 25% tax credit, paid in cash. This can be extremely helpful for new games startups who haven’t yet released any games, to improve short-term cashflow.
Below are some key points to help you better understand VGTR.
Who can make a Video Games Tax Relief claim?
To make a claim, you must be a limited company with a qualifying video game trade. You must also apply to the British Film Institute (BFI) for a certificate which proves that the game developed is ‘culturally British’. The criteria to satisfy the conditions include the setting of the game, the lead characters of the game, where development took place and a few other factors.
How to apply for a British Film Institute certificate?
An application for a certificate can be submitted through the British Film Institute website, and there’s a total of 31 points available to satisfy the criteria. Your game needs to obtain at least 16 points to qualify. Find out how points for the cultural test for video games are allocated here.
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What costs qualify for Video Games Tax Relief?
Core costs of the video game qualify for the enhanced relief. These relate to the design, testing and production of the game. This will mainly be salary and subcontractor costs incurred on the game development by the company. Dividends paid by the company are not eligible for VGTR.
How to make a claim
Claims are submitted to HMRC within the company tax return (CT600). A claim must be submitted within 2 years of the company’s accounting year-end. For example, a company with the 31st March 2023 year-end, would have to submit a claim by the 31st March 2025. Any VGTR credit is normally paid by HMRC within 4-6 weeks of submitting a claim.
Since the relief began in 2014, we have helped our clients obtain over £5m in tax relief as a result of developing qualifying video games. If you believe you could be eligible to claim, please complete the contact form below.
Video Game Expenditure Credit
Following a consultation process, the government has decided to replace Video Games Tax Relief (VGTR) with the new Video Game Expenditure Credit (VGEC). Here are some of the key changes:
- The application of the VGEC will be similar to the existing Research and Development Expenditure Credit (RDEC) rules. The headline rate will be a 34% ‘above the line’ credit applied to 80% of qualifying costs, resulting in a potential tax saving of 20.5%
- VGEC can be claimed on qualifying expenditure from 1 January 2024
- Games commencing from 1 April 2025 must claim VGEC rather than VGTR. On 1 April 2027, VGTR will cease, and all games must claim VGEC
- All qualifying costs for video games will need to be ‘used and consumed’ within the UK. EEA expenditure will no longer be eligible for relief
- There will no longer be a subcontractor cap (Previously £1m per game under VGTR rules)