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How to claim for Video Game Tax Reliefs (VGTR)

We’re big gamers here at Anderson & Edwards. You’ll see us spending our evenings playing everything from CS: GO, to Football Manager, Industria and Minecraft. As gamers who also happen to be accountants, this naturally makes us think about Video Game Tax Relief. After all, it’s in our best interest to make sure games companies are doing well and releasing more games (for us and the world…).

What is Video Game Tax Relief?

Video Game Tax Relief (VGTR) is a creative industry tax relief incentive for British companies. It is relevant if the company’s core spending is on designing, producing and testing the game.

How to qualify for the relief

Only limited companies can claim the tax relief. Some criteria is dependant on the game developers working on the game (regardless of whether they are employed or independent contractors, i.e. self-employed).

One criterion is that game developers need to pass a cultural test of being British. This would be done through the British Film Institute (BFI) who would issue an interim or final certification that allows the developer to claim the relief, once passed.

Companies cannot claim if the game is produced for;

  • advertising or promotional purposes
  • the purposes of gambling

What if I am a self-employed/independent games developer?

If you are a self-employed or independent game developer working with a games company, you should invoice the company your services and provide the above information so that the company can claim the relief.

What impact will the relief have on other taxes?

You can claim an additional deduction to reduce your profits or increase a loss. These actions may reduce the amount of any Corporation Tax the company is due. If you make a loss, some or all of this loss can be surrendered for a payable tax credit at a rate of 25%. If you were to get the tax credit, you would receive the cash in your company's bank account.

You could potentially receive a tax refund of up to 20% of the core game production costs. Companies can claim VGTS on whichever is lower:

  • 80% of total core expenditure; or
  • The total amount of core expenditure on goods or services that are provided from the European Economic Area (EEA)

You claim the relief on the annual company tax return, which will include the additional deductions and payable tax credit. This will be done by your accountant or tax advisor. To make the claim, you should also provide them with:

· A British cultural certificate from the British Film Institute (BFI)

· A statement of company core expenditure split by EEA and non-EEA costs

· A breakdown of expenditure by category

Why should I claim Video Game Tax Relief?

There are many benefits of the VGTR, these include:

  • Reducing costs, and the possibility of producing a better game for less
  • Cash boost to the company, allowing you to remain in business while the game is in development
  • Reducing the financial burden of producing the game
  • Using it as a source of funding whilst still maintaining full control

How to start preparing for your claim

As a company, make sure to speak to your accountant before your next annual tax return. This will ensure that you can gather the relevant information required and allow enough time to prepare for the claim.

As an employee, be advised that your employer may ask you for a British culture certificate in order to make this tax relief claim.

As a self-employed or independent developer, ensure you have your invoices and British culture certificate to hand in case the company you are working with asks for this information.

Still not sure where to start?

Speak to your accountant, or give us a ring. We help clients in the gaming industry because we’re avid gamers, not because we are accountants. However, our day jobs do help when it comes to tax reliefs. Email us at Enable JavaScript to view protected content. or phone us on 0131 364 4191.

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