Video Games Tax Relief – Playing the Game!
8th June 2015
Over the last few years the government has tried to encourage culturally British productions, by introducing five Creative industry tax reliefs, which incentivise investment in British productions that might otherwise have taken place overseas.
Video Games Tax Relief (VGTR) is one of the more recent tax reliefs to be introduced and came into effect on 1 April 2014. This generous new tax relief will help the UK to remain at the forefront of the world’s video games production for years to come.
VGTR will apply specifically to expenditure incurred on the development of video games by video games development companies that are engaged in the development of a British video game, developed with the intention for sale, with at least 25% of its core development expenditure being spent within the European Economic Area (EEA).
If a company qualifies for VGTR then an additional deduction can be claimed in calculating their taxable profits or in certain cases, can be surrendered in return for a payable tax credit.
However, as you might expect, when the government offers generous tax breaks, a number of conditions must be met in order to qualify for relief and HM Revenue & Customs (HMRC) recently issued detailed guidance in testament of this.
VGTR claims are made on individual games and therefore for each game that a company is developing, they must meet all the qualifying criteria. This means keeping track of specific expenditure on each game.
Before you consider making a VGTR claim, the game must be certified as a British video game by passing a cultural test, which is administered by the British Film Institute. You are able to apply for this before the game is completed and receive interim certification, which will give you confidence that the game will qualify for relief, allowing you to budget more accurately. Also, for games that are developed over a multiple number of accounting periods, it allows you to make interim VGTR claims, rather than having to wait for the completion of the game.
The HMRC guidance on identifying eligible VGTR expenditure and calculating tax relief claimable is very detailed and on the face of it, rather complicated to the untrained eye. However, they do provide helpful illustrations for calculating both single and multi-period claims.
The Media and Technology team at Plus Accounting has the necessary experience and expertise to help your business make a successful claim and if you would like more details on VGTR or assistance with making claims, do not hesitate to get in touch.
Written by Luke Thomas, Director at Plus Accounting