The UK government has supported the creative industry for many years with the introduction of tax reliefs for Recorded media and live productions, both covered by separate blogs.
Video Games Tax Relief (VGTR) was introduced in April 2014 and this blog is to provide an overview.
The reliefs work by increasing the amount of allowable expenditure. Where there is a loss, this may be surrendered to convert some or all of it into a payable tax credit.
Eligibility To Claim Tax Relief
Available only to companies if it is:
• Liable to corporation tax
• Directly involved in the production and development of certain films, high-end television programmes, animation programmes or video games.Film and television companies involved in the above are subject to special rules and should they opt out of these will no be eligible to claim the relevant creative industry tax relief.
A company will be entitled to claim VGTR if:
• 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)
Up to a maximum of 80% of the total core expenditure incurred by the video games company is eligible for relief. Core expenditure is expenditure on pre-development, principal photography and post-development.
Qualifying companies may claim an additional deduction in respect of qualifying expenditure on the game:
• The additional deduction is calculated on so much of the expenditure is EEA expenditure (subject to the subcontracting cap) or 80% of the total expenditure, if less
• Enhancing the expenditure by 100%
Or if the company makes a loss in any accounting period, it may surrender this for a payable video games tax credit:
• The surrenderable loss is the loss in the period or if less the available qualifying expenditure effectively incurred in the same period. This is paid at a rate of 25% for a game.