Video Game Tax Relief (VGTR) - Just how effective is this tax incentive?

VGTR allows for gaming companies to claim tax relief by way of a deduction in taxable profits, or by creating losses, which are then claimable as tax credits from HMRC at 25%. Sounds good, right?

In our December 2019 edition of Perspective magazine, we brought the lesser-known creative industry tax incentives (including VGTR) to the spotlight, to uncover how these reliefs may bring valuable cash to your business.

Does the relief benefit the UK economy?

There has been recent newspaper coverage about how large gaming corporates (particularly the makers of the ‘Grand Theft Auto’ franchise) are gaining a significant tax advantage from the tax relief, as they appear to generate substantial profits and effectively paying no tax in the UK. This has led some to question the benefits of the tax relief to the UK more generally.

However, according to HMRC’s August 2019 statistics on creative industry relief, since the introduction of gaming relief in 2014, £2.6billion has been spent on video game development by companies in the UK. This heavily outweighs the £324million paid out by HMRC (also provided from their August 2019 statistics) as a result of the incentive.

The idea is that this incentive can further be ploughed back into the company and ensure that in the international marketplace the UK continues to be considered an attractive place for such development activities to take place.

Could your company be eligible?

HMRC have placed no restriction on the size of the company, so now is the time for gaming businesses to assess whether they are eligible!

Is this the first video game you’re developing in the UK?

Here are some areas to check to assess whether you could benefit from the relief:

1. Is the video game British
2. Is the video game intended for supply
3. Will at least 25% of the expenditure be incurred in the European Economic Area (this latter point should not change as a result of Brexit)

If you believe your company meets these initial criteria, please get in touch with our specialist tax team.