Video Games Tax Relief (VGTR)
Contents
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 |
