A company in the UK can claim Video Games Tax Relief (VGTR) if the video game is certified as British by the British Film Institute (BFI) and is intended for public supply. VGTR offers UK companies financial support to develop video games, helping to reduce the corporation tax burden.

Conditions for Eligibility

To qualify for VGTR, the company must meet the following conditions:

• The company must be responsible for designing, producing, and testing the video game.
• The company must be actively involved in the planning and decision-making processes.
• The company must directly negotiate, contract, and pay for the rights, goods, and services associated with the production.
• At least 25% of the company’s core expenditure must be spent on goods or services provided within the UK or the European Economic Area (EEA).
• The video game must pass the UK cultural test and be certified as British.
• Video games produced solely for advertising, promotional, or gambling purposes do not qualify for VGTR.

Claimable Amount

The company can claim an additional deduction to reduce its profits or increase a loss, thereby reducing the corporation tax payable. In the case of a loss-making company, some or all of the losses can be surrendered for a payable tax credit at a rate of 25%.

The additional deduction the company can claim is the lower of:

• 80% of the total core expenditure.
• The amount of core expenditure spent on goods or services provided within the UK or EEA.

Core Costs

The core costs eligible for VGTR include expenditures on designing, producing, and testing the video game. As mentioned earlier, a minimum of 25% of the total core expenditure must be spent on goods or services provided within the UK or EEA.

Note that some costs are ineligible for VGTR, such as:

• Expenditure on initial concept design.
• Expenditure on debugging or maintenance of a completed game.
• Advertising and marketing costs.
• Finance costs, entertainment, and audit costs.

Claim Period

The company can make a claim for VGTR up to one year after the company’s filing date. For accounting periods beginning on or after 1 April 2024, the claim deadline extends to two years after the end of the relevant accounting period.

Closure of Tax Relief

VGTR will be phased out for all productions after 1 April 2027. However, companies can still claim relief under the Video Games Expenditure Credit (VGEC) scheme.

If production does not begin by 31 March 2025, VGTR will no longer be available. However, the VGEC will still be accessible to qualifying companies.

Speak to an Expert

If you’re in the creative industry, you may be eligible for VGTR. For an initial consultation with no obligation, please get in touch with us. We’re happy to assist you with your claim.