Video game developers in the UK can claim tax relief of up to 25% on the production costs of a game that is developed in the UK, according to the Treasury.
The Video Game Tax Relief (VGTR) legislation came into force earlier this year on 1 April, and is available to game developers as long as their video games are ‘culturally British’, are intended for supply, and at least 25% of the production expenditure is incurred within the European Economic Area.
To be able to claim relief, developers will need to get the British Film Institute (BFI) to clear the games as culturally British. The intention of the proposed cultural tests is to ensure that only culturally-rich British video games can avail the aid. As a result of this scheme, the video games industry is estimated to save close to £35 million annually.
The scheme has been welcomed by video game trade bodies like UKIE and TIGA, who have campaigned for the last 7 years to bring such a tax relief to the UK video game industry.
It’s a long campaign, but we have finally got there, said the Richard Wilson, chief executive of TIGA, It’s a good measure that allows the UK games industry to compete on a more level playing field.
He added, The tax relief will unleash the financial and creative potential of the UK’s game businesses, benefit studios of all shapes and sizes and boost the production of culturally British video games. TIGA’s own research indicates that over five years the tax relief will create and protect 10,300 direct and indirect jobs and create and protect approximately £450 million investment expenditure by UK studios.
In the UK there are currently around 500 games development studios, employing over 9000 staff members. 95% of these studios are SMEs and have generated approximately £2.19 billion in sales in 2013. The introduction of such a tax relief means game studios will now have more money for development.
Any developer that qualifies for VGTR will also be entitled to the following:
HMRC’s website says that “video game companies may be carrying out research and development and or may have claimed research and development (R&D) tax relief in the past” but it’s important to note that where SME R&D tax relief is claimed on a project, that project cannot claim for any other State Aid relief.’ However the rules for large companies are different.
The Video Game Tax Relief (VGTR) is similar to the sort of tax relief that film companies have already been given. The certification unit at the BFI has already approved a number of applications received under the VGTR scheme. To find out if you can pass the cultural test; have a look at the criteria on the BFI website.