Video Game Tax Relief (VGTR)

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Understanding the Video Games Tax Relief

Much like in other creative sectors such as film and theatre, tax relief exists in the UK games industry in order to promote works deemed to provide cultural value and support UK businesses.

Ukie’s Access to Finance Guide provides detailed guidance on VGTR. Additionally, HMRC offers guidance on taxation for games companies in its Video Games Development Company Manual.

Video Games Tax Relief is an incentive that allows games studios to claim tax relief from the Government, following the development of a game. In order to qualify for VGTR, the game must meet several criteria and pass the BFI’s Cultural Test.

Applying for the Cultural Test

The Cultural Test is a points-based test which seeks to incentivise the development of games with British cultural content and works that make a valuable ‘cultural contribution’. The employment of UK and EEA citizens is also incentivised in the Cultural Test, meaning multinational games companies are given a strong financial reason to make games in the UK and employ UK and EEA workers.

A project requires at least 16 of a possible 31 points in order to pass the Cultural Test. Points on the test are scored as follows:

Section A – Cultural content
A1 Set in the UK or an EEA state or (Up to 3 points will be awarded for set in an undetermined location) Up to 4 Points
A2 Lead characters British or EEA citizens or residents (or characters from an undetermined location) Up to 4 Points
A3 Video game based on British subject matter or relates to an EEA state or underlying material 4 points
A4 Original dialogue recorded mainly in English language or one of six UK indigenous languages Up to 4 Points
Section B – Cultural contribution
B Video game represents/reflects British creativity, British heritage or diversity Up to 4 Points
Section C – Cultural hubs
C1 At least 50% of the conceptual development or storyboarding or programming or design takes place in the UK 2 points
C2 At least 50% of the music recording or audio production or voice recording takes place in the UK 1 point
Section D – Personnel
D1 1 of the 3 lead project leaders is an EEA citizen or resident 1 point
D2 1 of the 3 lead scriptwriters is an EEA citizen or resident 1 point
D3 1 of the 3 lead composers is an EEA citizen or resident 1 point
D4 1 of the 3 lead artists is an EEA citizen or resident 1 point
D5 1 of the 3 lead programmers is an EEA citizen or resident 1 point
D6 1 of the 3 lead designers is an EEA citizen or resident 1 point
D7 At least 1 of the 7 key HoDs is an EEA citizen or resident 1 point
D8 At least 50% of the development team are EEA citizens or residents 1 point
Total 31 points

An application for the cultural test can be submitted via the BFI website. An initial application must be submitted prior to or during the development of the game and a final application must be submitted after the completion of the game’s development.

Economic Impacts of the VGTR

In the BFI’s Screen Business Report, it was found that games supported by VGTR provided 9,240 jobs across the industry, including 4,320 game development FTEs. The report also shows that for every £1 invested into the games industry via VGTR, an additional £4 is generated in GVA for the UK economy.

Further details on this report can be found here

Amount Paid in Tax Relief to Date

According to data released by HMRC in August 2019, a total of £324 million of VGTR has been paid out to 1,110 claims since the relief was launched in April 2014. In 2018-19, 345 claims were made for a total of £103 million, which represented 535 games.

Since the relief was introduced in 2014, 1,075 video games have made claims, accounting for £2.6 billion of UK expenditure.

Claims and amount of relief paid on receipts basis

Paid
Year Claim Paid Number of Games Number of Claims Amount (£m)
2014-15 10 10 -
2015-16 100 130 45
2016-17 340 275 71
2017-18 475 345 104
2018-19 535 345 103
Total - 1,110 324

NB. No total provided for number of games, as a single game can be claimed in multiple years.

Claims and amount of relief paid on receipts basis, split by size of claim

2016-17 2017-18 2018-19
Size of claim Number Amount (£m) Number Amount (£m) Number Amount (£m)
Up to £5,000 30 - 65 - 50 -
£5,001 to £10,000 35 - 35 - 25 -
£10,001 to £25,000 55 1 80 1 65 1
£25,001 to £50,000 35 1 40 1 55 2
£50,001 to £100,000 30 2 30 2 45 3
£100,001 to £500,000 50 11 65 13 55 12
£500,001 to £1,000,000 20 13 15 9 20 12
Over £1,000,000 15 42 25 77 30 73
Total 275 71 345 104 345 103

NB. Numbers are rounded to the nearest 5 and amounts to £1 million. Totals may not sum due to rounding.

Video Games which claimed tax relief, by expenditure and financial year of completion

Finance Year of Completion Number of Games Claimed UK Expenditure* (£m) Total Expenditure (£m)
2014-15 70 23 25
2015-16 230 546 747
2016-17 250 405 454
2017-18 240 323 435
2018-19 170 492 1,121
Incomplete* 110 780 927
Total 1,075 2,569 3,709

NB. Expenditure final and interim only. Games with an estimated completion date after 31st March 2019 are defined as 'Incomplete'.

Certifications by Fiscal (Financial) Year

Latest data available via the BFI here

Final Certifications per Year

Year Number EEA/UK spend (£m) Total budget (£m) UK spend as a % of total budget
Apr 2014-Mar 2015 19 14.3 15.1 95.2%
Apr 2014-Mar 2016 133 189.0 275.3 68.7%
Apr 2014-Mar 2017 214 220.8 258.3 85.5%
Apr 2014-Mar 2018 201 247.8 262.6 94.4%
Apr 2014-Mar 2019 188 430.1 1,042.1 41.3%

Interim Certifications per Year

Year Number EEA/UK spend (£m) Total budget (£m) UK spend as a % of total budget
Apr 2014-Mar 2015 47 157.7 166.32 94.7%
Apr 2014-Mar 2016 136 575.75 631.22 91.22%
Apr 2014-Mar 2017 187 412.27 482.22 85.5%
Apr 2014-Mar 2018 181 540.43 1,107.17 48.8%
Apr 2014-Mar 2019 151 411.91 536.96 41.3%

Median budgets of interim video game cultural test certifications

Year Median budget (£m)
2014* 0.2
2015 0.6
2016 0.4
2017 0.4
2018 0.5
2019 (Q1) 1.0

NB. As the tax relief for video games commenced in April 2014, median budget for 2014 is for Q2-Q4.

Certifications by Calendar Year

Latest data available via the BFI here

Final Certifications per Year

Year Number UK/EEA spend (£m) Total budget (£m) UK/EEA spend as a % of total budget
2015 116 180.9 265.6 68.1%
2016 189 202.2 224.5 90.1%
2017 212 248.8 277.5 89.7%
2018 195 201.9 263.9 76.5%

Interim Certifications per Year

Year Number UK/EEA spend (£m) Total budget (£m) UK/EEA spend as a % of total budget
2015 121 548.0 603.6 90.8%
2016 176 401.7 466.9 86.0%
2017 179 434.3 461.7 94.1%
2018 170 517.6 1,106.4 46.8%

Median budgets of interim video game cultural test certifications

Year Median budget (£m)
2015 0.6
2016 0.4
2017 0.4
2018 0.5

VGTR Resources