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Jun 20 2024

Understanding Video Games Tax Relief

If you’re the producer of a video game in the UK, you may be eligible for tax relief. This can be useful for giving businesses an option for obtaining potential financial benefits. Find out all there is to know about video games tax relief, including how to go about claiming and eligibility requirements.


What is video games tax relief in the UK

Video Games Tax Relief is a UK scheme that allows companies to reduce the amount of Corporation tax they have to pay. This additional deduction will either have the effect of reducing profits or increasing losses. This will be the lower of either:

  • The core expenditure on goods and services from the UK and European Economic Area (EEA).
  • 80% of total core expenditure.

If you’re currently making a loss, some amount can be surrendered for a payable tax credit at a rate of 25%. It’s important to note however, that the Video Games Tax Relief Scheme will be closing from April 1st 2027.

It is also possible for companies to qualify for Video games Expenditure Credits (VGEC), which will remain after the video games tax relief scheme has ended. This can provide Corporation Tax relief on expenditure incurred after January 1st 2024. Eligibility criteria for these credits is similar to Video Games Tax Relief, which we will discuss below.

Eligibility for video games tax relief

Eligibility for video games tax relief requires meeting certain criteria set by the UK government. These criteria include being a British video game production company and ensuring that the game being developed is culturally British. You must also be able to prove the business is:

  • Responsible for the production, design, and testing of the video game.
  • Able to negotiate, create contracts, pay for rights and services.
  • Actively engaged in decision making and planning.
  • Spending at least 25% of its ‘core costs’ on goods and services provided within the EEA or the UK itself.

Furthermore, to qualify for video games tax relief, the video game must pass a cultural test. This test evaluates various aspects of the game, such as its cultural content, contribution to British heritage, and the extent of British creative involvement in its development. This certification is managed by the British Film Institute on behalf of the Department for Culture, Media, and Sport.

Meeting these eligibility criteria can be a rigorous process, but the benefits of video games tax relief can be substantial for companies looking to offset some of the costs associated with creating innovative and culturally significant video games. The Video Games Development Company Manual details how the relief is calculated.

The concept behind video games tax relief

Developing a video game can be a costly endeavour, with expenses ranging from hiring developers and artists to marketing and distribution. Video games tax relief aims to support the growth of the video game industry in the UK by providing a financial incentive for companies to invest in the development of culturally significant games. Jan McDermott Chartered Accountants seek to support games and app developers through efficient financial management and accountant for small business services.

Video games tax relief grants a degree of financial assistance to developers and publishers of video games. It is designed to alleviate some of the financial burdens associated with creating and promoting video games, particularly for small and independent studios.


Specialist tax support from chartered accountants

If you need support in claiming video games tax relief, or any form of tax relief specific to your industry, Jan McDermott Chartered Accountants can help. Our team is always up-to-date on all tax relief offerings in the UK, so you aren’t missing out on potential savings. Contact us if you have any questions regarding tax for businesses, or any other area of financial management.