Tax relief on your video game production costs
Video Games Tax Relief was introduced in April 2014 to promote the UK games industry. Although many costs of the games were (and still are) eligible for R&D tax relief (such as increasingly realistic graphics, sound or playability or development of existing games to work on new platforms) many were not and it was felt that the UK was falling behind, especially to countries with specific reliefs for video games.
Who can make a claim?
The relief is available for UK development companies, i.e. those primarily responsible for designing, producing and testing the game and actively engaged in the planning and decision making. This relief can provide a cash tax saving or payable credit of 16- 25% of the core UK expenditure. Core expenditure relates to designing, producing and testing. It does not include designing the original concept or debugging the completed game or post-release maintenance.
In order to be eligible for the relief, the following criteria must be met:
- The game must be intended for supply to the general public
- It must be certified as British
- At least 25% of core expenditure on the game must be from within the European Economic Area (EEA)
- The video game does not include anything for advertising, promotional or gambling purposes
Rates of relief
The relief can be claimed on the lower of:
- 80% of the total core expenditure
- Actual EEA expenditure incurred
It is important to note that each game must be treated as a separate trade in the development company, and therefore the accounting and allocation of costs between games is important.
The video games development company can claim an additional deduction of 100%, or a payable tax credit of 25% if the programme is loss-making.
In order to be certified as British, the game must pass a cultural test. The cultural test includes criteria such as setting, the location of developers and subject matter, with points available for each. In order to qualify, a game must gain at least 16 points out of a total of 31. Certification is granted by the Department for Culture, Media and Sport (DCMS), and the relief cannot be claimed until it has been granted. Interim certificates can be obtained if the game is not yet complete, with a final certificate being issued on completion.
Where can I get help with my claim?
The tax relief available is generous, but claims must be properly made to ensure they meet HMRC and DCMS requirements. Claims will be reviewed carefully so it is important to work with experienced tax advisers to ensure your claim meets the necessary criteria and you obtain the optimal tax relief.
If you would like to discuss video game tax relief further, or if you are unsure if you are eligible, please get in touch with our tax adviser Dan Hobbs on 01903 234094 or firstname.lastname@example.org