Video games tax relief (VGTR)

Video Games Tax Relief (VGTR) is a Corporation Tax relief that is available to companies who produce British video games. The relief comes in the form of an additional deduction of up to 80% of qualifying expenditure which reduces the developing company’s profits chargeable to Corporation Tax and therefore reduces the Corporation Tax payable to HMRC. Where the additional deduction creates or increases a loss, the company may surrender an amount of the loss equal to the lower of the VGTR enhancement and the available loss, for a VGTR tax credit equal to 25 percent of the loss surrendered.

How does a company qualify for VGTR?

To qualify for the tax relief, a video game developer needs to meet the following 3 criteria:

  • the game would need to certify as a British game,
  • the game must be intended for supply to the general public and;
  • at least 25% of the qualifying expenditure incurred while producing the game would need to be spent on goods and services sourced within the European Economic Area (EEA).

To be certified as a British game; the game would need to acquire 16 points under ‘The Cultural Test’. Under this test points are awarded for meeting criteria such as whether the content of the game contains British or European features, whether the game is attempting to promote, enhance or develop British Culture and whether the key personnel producing the game are located in the EEA. A company must submit its Cultural Test application to the British Film Institute (‘BFI’). If the BFI is satisfied that the test is passed it will then issue an interim certificate for a game that is still in production and a final certificate for a game that is completed.

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