Video Games Tax Relief

The long awaited Video Games Tax Relief was given European Commission approval last month and came into effect for expenditure incurred on or after 1 April 2014.

What is Video Game Tax Relief?

The relief provides an additional deduction against taxable profits for companies which take the lead role in the design and production of video games which are intended for supply to the general public, which are British video games and which meet a minimum UK expenditure test.

The additional deduction is equal to the lower of UK qualifying expenditure or 80% of total qualifying expenditure on the game. If the company is loss making, a payable tax credit is given at the rate of 25%.

What are the requirements for Video Game Tax Relief?

Video games can qualify as British only through being certified as such by the British Film Institute (BFI). To meet the certification requirements, a game must obtain at least 16 out of a possible 30 points across a range of cultural attributes, including British locations, characters, English language, demonstrating British heritage or creativity and production activity in the UK. The Certification unit at the BFI is now accepting draft applications under the new certification process.

A company which develops a qualifying video game must calculate its profits and losses for each qualifying game as if they were a separate trade, regardless of whether the company wishes to claim the additional relief.

It should also be noted that a company cannot claim both Video Games Tax Relief and any Research & Development tax relief and therefore companies eligible for both schemes should undertake a review as to which is the most beneficial.