Video Games Tax Relief (VGTR)

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

These can be found in the Screen Business report.

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