Difference between revisions of "Video Games Tax Relief (VGTR)"

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(Rewrote and restructured article, condensed data displayed and updated to reflect latest statistics from BFI and HMRC. BFI website down at end of day so final resource links are outstanding.)
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== Understanding the Video Games Tax Relief ==  
 
== Understanding the Video Games Tax Relief ==  
  
Much like [https://www.gov.uk/guidance/corporation-tax-creative-industry-tax-reliefs 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.  
+
In the UK, qualifying companies can claim tax relief on the developemnt of video games. This [https://www.gov.uk/guidance/claiming-video-games-tax-relief-for-corporation-tax video games tax relief] (VGTR) is intended [https://ec.europa.eu/competition/state_aid/cases/270946/270946_1940785_80_2.pdf to address the underproduction of culturally European video games]. Similar [https://www.gov.uk/guidance/corporation-tax-creative-industry-tax-reliefs creative industry tax reliefs] are available across the other creative sectors such as film, animation and theatre.
  
Ukie’s [https://ukie.org.uk/a2f/VGTR Access to Finance Guide] provides detailed guidance on VGTR. Additionally, HMRC offers guidance on taxation for games companies in its [https://www.gov.uk/hmrc-internal-manuals/video-games-development-company-manual Video Games Development Company Manual].
+
===The value of the tax relief===
  
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 [https://www.bfi.org.uk/film-industry/british-certification-tax-relief/cultural-test-video-games Cultural Test].
+
VGTR is claimed on a company's annual tax return. It can take the form of either:
 +
*an additional deduction (up to 80% of core expenditure) from the company's profits, lowering the corporation tax that the company has to pay.
 +
*a payable tax credit worth up to 20% of total core expenditure on the game, when the project makes a loss.
  
== Applying for the Cultural Test ==
+
"Core expenditure" is what’s spent on designing, producing and testing the game. Only expenditure incurred in the UK and EEA is eligible for tax relief. Detailed information on the relief and its value can be found in HMRC's [https://www.gov.uk/hmrc-internal-manuals/video-games-development-company-manual video games development company manual].
  
[https://www.bfi.org.uk/film-industry/british-certification-tax-relief/cultural-test-video-games 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.
+
== Qualifying for VGTR ==
 +
 
 +
VGTR can only be claimed by a video games development company (VGDC) that meets the following requirements.
 +
*The company is incorporated at Companies House* before full production begins on the game.
 +
*The company is actively engaged in planning and decision-making.
 +
*The company directly negotiates, contracts and pays for rights, goods and services.
 +
 
 +
VGTR can only be claimed on video games that meet the following requirements.
 +
*The game is intended for supply to the general public.
 +
*At least 25% of core expenditure is incurred within the UK or EEA.
 +
*The game is certified as British by the British Film Institute (BFI) through the Cultural Test.
 +
 
 +
'''NB''' If you are registering a games company at companies house, please consider using the SIC code 62011 if you are a developer and 58210 if you are a publisher.
 +
 
 +
== The Cultural Test ==
 +
 
 +
The cultural test is a 31-point assessment to determine if a video game is culturally British, administered by the BFI. The pass mark is 16. There are similar tests for some of the other creative sectors, dating back to 2007.
 +
 
 +
Video games that qualify under the cultural test are issued with a certificate which much be included with the company's tax return when claiming tax relief. Interim certificates are awarded to games that are currently in development. Final certificates are issued to games that are completed and released. The BFI can advise directly on more complex games, such as those following a games-as-a-service model. Cultural Test applications are made through [https://www.bfi.org.uk/apply-british-certification-tax-relief/cultural-test-video-games the BFI's website], where you can also find more detailed information.
 +
 
 +
The content of the cultural test is as follows.
  
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:
 
 
{| class="wikitable"
 
{| class="wikitable"
 
!colspan="3"|Section A – Cultural content
 
!colspan="3"|Section A – Cultural content
 
|-
 
|-
 
|A1
 
|A1
|Set in the UK or an EEA state or (Up to 3 points will be awarded for set in an undetermined location)
+
|Set in the UK, an EEA state or an undetermined location (points awarded for undetermined settings are capped at 3)
 
|Up to 4 Points
 
|Up to 4 Points
 
|-
 
|-
 
|A2
 
|A2
|Lead characters British or EEA citizens or residents (or characters from an undetermined location)
+
|Lead characters are UK/EEA citizens or residents or are characters from an undetermined location (there is no points cap for undetermined characters)
 
|Up to 4 Points
 
|Up to 4 Points
 
|-
 
|-
 
|A3
 
|A3
|Video game based on British subject matter or relates to an EEA state or underlying material
+
|a) British/EEA story or subject matter
 +
|OR
 +
|b) Video game is based on British or EEA underlying material
 
|4 points
 
|4 points
 
|-
 
|-
 
|A4
 
|A4
|Original dialogue recorded mainly in English language or one of six UK indigenous languages
+
|Original dialogue or game text is presented mainly in English language or one of six UK indigenous languages
 
|Up to 4 Points
 
|Up to 4 Points
 
|-
 
|-
Line 50: Line 73:
 
|-
 
|-
 
|D1
 
|D1
|1 of the 3 lead project leaders is an EEA citizen or resident
+
|1 of the 3 project leaders is a UK/EEA citizen or resident
 
|1 point
 
|1 point
 
|-
 
|-
 
|D2
 
|D2
|1 of the 3 lead scriptwriters is an EEA citizen or resident
+
|1 of the 3 lead scriptwriters is a UK/EEA citizen or resident
 
|1 point
 
|1 point
 
|-
 
|-
 
|D3
 
|D3
|1 of the 3 lead composers is an EEA citizen or resident
+
|1 of the 3 lead composers is a UK/EEA citizen or resident
 
|1 point
 
|1 point
 
|-
 
|-
 
|D4
 
|D4
|1 of the 3 lead artists is an EEA citizen or resident
+
|1 of the 3 lead artists is a UK/EEA citizen or resident
 
|1 point
 
|1 point
 
|-
 
|-
 
|D5
 
|D5
|1 of the 3 lead programmers is an EEA citizen or resident
+
|1 of the 3 lead programmers is a UK/EEA citizen or resident
 
|1 point
 
|1 point
 
|-
 
|-
 
|D6
 
|D6
|1 of the 3 lead designers is an EEA citizen or resident
+
|1 of the 3 lead designers is a UK/EEA citizen or resident
 
|1 point
 
|1 point
 
|-
 
|-
 
|D7
 
|D7
|At least 1 of the 7 key HoDs is an EEA citizen or resident
+
|At least 1 of the 7 key Heads of Department is a UK/EEA citizen or resident
 
|1 point
 
|1 point
 
|-
 
|-
 
|D8
 
|D8
|At least 50% of the development team are EEA citizens or residents
+
|At least 50% of the development team are UK/EEA citizens or residents
 
|1 point
 
|1 point
 
|-
 
|-
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|}
 
|}
  
An application for the cultural test can be submitted via the [https://www.bfi.org.uk/film-industry/british-certification-tax-relief/cultural-test-video-games 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.
+
In the context of the cultural test, "undetermined" refers to science fiction, fantasy and generically themed places/characters such as a "forest level".
 
 
== Economic Impacts of the VGTR ==
 
 
 
In the [https://ukie-wiki.herokuapp.com/index.php?title=BFI_Screen_Business#VGTR_Findings 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 [https://ukie-wiki.herokuapp.com/index.php?title=BFI_Screen_Business#VGTR_Findings here]
 
  
== Amount Paid in Tax Relief to Date ==
+
== Economic Impact of VGTR ==
  
According to data [https://www.gov.uk/government/statistics/creative-industries-statistics-august-2019 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.
+
In the BFI’s 2018 [https://www.bfi.org.uk/industry-data-insights/reports/uk-screen-sector-economy 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.
  
Since the relief was introduced in 2014, 1,075 video games have made claims, accounting for £2.6 billion of UK expenditure.
+
=== Number of applications and reported budget ===
  
=== Claims and amount of relief paid on receipts basis ===
+
This table shows the combined total of interim and final certificates issued in each year alongside the budgets and UK expenditure of projects as reported by applicants. Adapted from tables published by [https://core-cms.bfi.org.uk/media/950/download the BFI's Research and Statistics Unit]. More detailed breakdowns and further information can be found at that link.
  
 
{| class="wikitable"
 
{| class="wikitable"
!
+
!Year
!colspan="3"|Paid
+
!Number
 +
!UK expenditure (£m)
 +
!Total budget (£m)
 +
!UK/EEA spend as a % of total budget
 
|-
 
|-
!Year Claim Paid
+
|style="text-align:left;" | 2015
!Number of Games
+
|style="text-align:right;" | 237
!Number of Claims
+
|style="text-align:right;" | 728.9
!Amount (£m)
+
|style="text-align:right;" | 869.2
 +
|style="text-align:right;" | 83.9%
 
|-
 
|-
|style="text-align:left;" | 2014-15
+
|style="text-align:left;" | 2016
|style="text-align:right;" | 10
+
|style="text-align:right;" | 365
|style="text-align:right;" | 10
+
|style="text-align:right;" | 603.9
|style="text-align:right;" | -
+
|style="text-align:right;" | 691.4
 +
|style="text-align:right;" | 87.3%
 
|-
 
|-
|style="text-align:left;" | 2015-16
+
|style="text-align:left;" | 2017
|style="text-align:right;" | 100
+
|style="text-align:right;" | 391
|style="text-align:right;" | 130
+
|style="text-align:right;" | 683.1
|style="text-align:right;" | 45
+
|style="text-align:right;" | 739.1
 +
|style="text-align:right;" | 92.4%
 
|-
 
|-
|style="text-align:left;" | 2016-17
+
|style="text-align:left;" | 2018
|style="text-align:right;" | 340
+
|style="text-align:right;" | 369
|style="text-align:right;" | 275
+
|style="text-align:right;" | 721.7
|style="text-align:right;" | 71
+
|style="text-align:right;" | 1,410.4
|-
+
|style="text-align:right;" | 51.2%
|style="text-align:left;" | 2017-18
 
|style="text-align:right;" | 475
 
|style="text-align:right;" | 345
 
|style="text-align:right;" | 104
 
|-
 
|style="text-align:left;" | 2018-19
 
|style="text-align:right;" | 535
 
|style="text-align:right;" | 345
 
|style="text-align:right;" | 103
 
 
|-
 
|-
|style="text-align:left;" | '''Total'''
+
|style="text-align:left;" | 2019
|style="text-align:right;" | '''-'''
+
|style="text-align:right;" | 381
|style="text-align:right;" | '''1,110'''
+
|style="text-align:right;" | 977.6
|style="text-align:right;" | '''324'''
+
|style="text-align:right;" | 1,664.6
 +
|style="text-align:right;" | 58.7%
 
|}
 
|}
  
NB. No total provided for number of games, as a single game can be claimed in multiple years.
+
=== Tax relief paid to games companies ===
  
=== Claims and amount of relief paid on receipts basis, split by size of claim ===
+
According HMRC's [https://www.gov.uk/government/statistics/creative-industries-statistics-august-2020 Creative industries statistics commentary], published August 2020, a total of '''£444 million''' has been paid out to '''1,460 claims''' since the relief was launched in April 2014. In 2019-20, '''350 claims''' were made for a total of '''£121 million''', which represented '''605 games'''. The table below shows the number of VGTR claims and the amount of relief paid on receipts basis, split by size of claim for the past three years. For further detail and alternative breakdowns, please see HMRC's [https://www.gov.uk/government/statistics/creative-industries-statistics-august-2020 Creative industries tax relief statistics tables] document.
  
 
{| class="wikitable"
 
{| class="wikitable"
 
!
 
!
!colspan="2"|2016-17
 
 
!colspan="2"|2017-18
 
!colspan="2"|2017-18
 
!colspan="2"|2018-19
 
!colspan="2"|2018-19
 +
!colspan="2"|2019-20
 
|-
 
|-
 
!Size of claim  
 
!Size of claim  
Line 160: Line 175:
 
|-
 
|-
 
|style="text-align:left;" | Up to £5,000
 
|style="text-align:left;" | Up to £5,000
|style="text-align:right;" | 30
 
|style="text-align:right;" | -
 
 
|style="text-align:right;" | 65
 
|style="text-align:right;" | 65
|style="text-align:right;" | -
+
|style="text-align:right;" | (*)
 
|style="text-align:right;" | 50
 
|style="text-align:right;" | 50
|style="text-align:right;" | -
+
|style="text-align:right;" | (*)
 +
|style="text-align:right;" | 40
 +
|style="text-align:right;" | (*)
 
|-
 
|-
 
|style="text-align:left;" | £5,001 to £10,000
 
|style="text-align:left;" | £5,001 to £10,000
|style="text-align:right;" | 35
+
|style="text-align:right;" | 30
|style="text-align:right;" | -
+
|style="text-align:right;" | (*)
|style="text-align:right;" | 35
 
|style="text-align:right;" | -
 
 
|style="text-align:right;" | 25
 
|style="text-align:right;" | 25
|style="text-align:right;" | -
+
|style="text-align:right;" | (*)
 +
|style="text-align:right;" | 30
 +
|style="text-align:right;" | (*)
 
|-
 
|-
 
|style="text-align:left;" | £10,001 to £25,000
 
|style="text-align:left;" | £10,001 to £25,000
|style="text-align:right;" | 55
 
|style="text-align:right;" | 1
 
 
|style="text-align:right;" | 80
 
|style="text-align:right;" | 80
 
|style="text-align:right;" | 1
 
|style="text-align:right;" | 1
 
|style="text-align:right;" | 65
 
|style="text-align:right;" | 65
 
|style="text-align:right;" | 1
 
|style="text-align:right;" | 1
 +
|style="text-align:right;" | 60
 +
|style="text-align:right;" | (*)
 
|-
 
|-
 
|style="text-align:left;" | £25,001 to £50,000
 
|style="text-align:left;" | £25,001 to £50,000
|style="text-align:right;" | 35
 
|style="text-align:right;" | 1
 
 
|style="text-align:right;" | 40
 
|style="text-align:right;" | 40
 
|style="text-align:right;" | 1
 
|style="text-align:right;" | 1
 
|style="text-align:right;" | 55
 
|style="text-align:right;" | 55
 +
|style="text-align:right;" | 2
 +
|style="text-align:right;" | 50
 
|style="text-align:right;" | 2
 
|style="text-align:right;" | 2
 
|-
 
|-
 
|style="text-align:left;" | £50,001 to £100,000
 
|style="text-align:left;" | £50,001 to £100,000
|style="text-align:right;" | 30
 
|style="text-align:right;" | 2
 
 
|style="text-align:right;" | 30
 
|style="text-align:right;" | 30
 
|style="text-align:right;" | 2
 
|style="text-align:right;" | 2
 
|style="text-align:right;" | 45
 
|style="text-align:right;" | 45
 +
|style="text-align:right;" | 3
 +
|style="text-align:right;" | 50
 
|style="text-align:right;" | 3
 
|style="text-align:right;" | 3
 
|-
 
|-
 
|style="text-align:left;" | £100,001 to £500,000
 
|style="text-align:left;" | £100,001 to £500,000
|style="text-align:right;" | 50
 
|style="text-align:right;" | 11
 
 
|style="text-align:right;" | 65
 
|style="text-align:right;" | 65
 
|style="text-align:right;" | 13
 
|style="text-align:right;" | 13
 
|style="text-align:right;" | 55
 
|style="text-align:right;" | 55
 
|style="text-align:right;" | 12
 
|style="text-align:right;" | 12
 +
|style="text-align:right;" | 75
 +
|style="text-align:right;" | 18
 
|-
 
|-
 
|style="text-align:left;" | £500,001 to £1,000,000
 
|style="text-align:left;" | £500,001 to £1,000,000
|style="text-align:right;" | 20
+
|style="text-align:right;" | 10
|style="text-align:right;" | 13
+
|style="text-align:right;" | 8
 +
|style="text-align:right;" | 25
 +
|style="text-align:right;" | 14
 
|style="text-align:right;" | 15
 
|style="text-align:right;" | 15
|style="text-align:right;" | 9
+
|style="text-align:right;" | 11
|style="text-align:right;" | 20
 
|style="text-align:right;" | 12
 
 
|-
 
|-
 
|style="text-align:left;" | Over £1,000,000
 
|style="text-align:left;" | Over £1,000,000
|style="text-align:right;" | 15
 
|style="text-align:right;" | 42
 
 
|style="text-align:right;" | 25
 
|style="text-align:right;" | 25
 
|style="text-align:right;" | 77
 
|style="text-align:right;" | 77
 +
|style="text-align:right;" | 25
 +
|style="text-align:right;" | 72
 
|style="text-align:right;" | 30
 
|style="text-align:right;" | 30
|style="text-align:right;" | 73
+
|style="text-align:right;" | 85
 
|-
 
|-
 
|style="text-align:left;" | '''Total'''
 
|style="text-align:left;" | '''Total'''
|style="text-align:right;" | '''275'''
 
|style="text-align:right;" | '''71'''
 
 
|style="text-align:right;" | '''345'''
 
|style="text-align:right;" | '''345'''
 +
|style="text-align:right;" | '''103'''
 +
|style="text-align:right;" | '''350'''
 
|style="text-align:right;" | '''104'''
 
|style="text-align:right;" | '''104'''
|style="text-align:right;" | '''345'''
+
|style="text-align:right;" | '''350'''
|style="text-align:right;" | '''103'''
+
|style="text-align:right;" | '''121'''
|}
 
 
 
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 ===
 
 
 
{| class="wikitable"
 
!Finance Year of Completion
 
!Number of Games Claimed
 
!UK Expenditure* (£m)
 
!Total Expenditure (£m)
 
|-
 
|style="text-align:left;" | 2014-15
 
|style="text-align:right;" | 70
 
|style="text-align:right;" | 23
 
|style="text-align:right;" | 25
 
|-
 
|style="text-align:left;" | 2015-16
 
|style="text-align:right;" | 230
 
|style="text-align:right;" | 546
 
|style="text-align:right;" | 747
 
|-
 
|style="text-align:left;" | 2016-17
 
|style="text-align:right;" | 250
 
|style="text-align:right;" | 405
 
|style="text-align:right;" | 454
 
|-
 
|style="text-align:left;" | 2017-18
 
|style="text-align:right;" | 240
 
|style="text-align:right;" | 323
 
|style="text-align:right;" | 435
 
|-
 
|style="text-align:left;" | 2018-19
 
|style="text-align:right;" | 170
 
|style="text-align:right;" | 492
 
|style="text-align:right;" | 1,121
 
|-
 
|style="text-align:left;" | Incomplete*
 
|style="text-align:right;" | 110
 
|style="text-align:right;" | 780
 
|style="text-align:right;" | 927
 
|-
 
|style="text-align:left;" | '''Total'''
 
|style="text-align:right;" | '''1,075'''
 
|style="text-align:right;" | '''2,569'''
 
|style="text-align:right;" | '''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 [https://www.bfi.org.uk/sites/bfi.org.uk/files/downloads/bfi-british-film-other-screen-sectors-certification-q1-2019.pdf here]
 
 
 
=== Final Certifications per Year ===
 
 
 
{| class="wikitable"
 
!Year
 
!Number
 
!EEA/UK spend (£m)
 
!Total budget (£m)
 
!UK spend as a % of total budget
 
|-
 
|style="text-align:left;" | Apr 2014-Mar 2015
 
|style="text-align:right;" | 19
 
|style="text-align:right;" | 14.3
 
|style="text-align:right;" | 15.1
 
|style="text-align:right;" | 95.2%
 
|-
 
|style="text-align:left;" | Apr 2014-Mar 2016
 
|style="text-align:right;" | 133
 
|style="text-align:right;" | 189.0
 
|style="text-align:right;" | 275.3
 
|style="text-align:right;" | 68.7%
 
|-
 
|style="text-align:left;" | Apr 2014-Mar 2017
 
|style="text-align:right;" | 214
 
|style="text-align:right;" | 220.8
 
|style="text-align:right;" | 258.3
 
|style="text-align:right;" | 85.5%
 
|-
 
|style="text-align:left;" | Apr 2014-Mar 2018
 
|style="text-align:right;" | 201
 
|style="text-align:right;" | 247.8
 
|style="text-align:right;" | 262.6
 
|style="text-align:right;" | 94.4%
 
|-
 
|style="text-align:left;" | Apr 2014-Mar 2019
 
|style="text-align:right;" | 188
 
|style="text-align:right;" | 430.1
 
|style="text-align:right;" | 1,042.1
 
|style="text-align:right;" | 41.3%
 
|}
 
 
 
=== Interim Certifications per Year ===
 
 
 
{| class="wikitable"
 
!Year
 
!Number
 
!EEA/UK spend (£m)
 
!Total budget (£m)
 
!UK spend as a % of total budget
 
|-
 
|style="text-align:left;" | Apr 2014-Mar 2015
 
|style="text-align:right;" | 47
 
|style="text-align:right;" | 157.7
 
|style="text-align:right;" | 166.32
 
|style="text-align:right;" | 94.7%
 
|-
 
|style="text-align:left;" | Apr 2014-Mar 2016
 
|style="text-align:right;" | 136
 
|style="text-align:right;" | 575.75
 
|style="text-align:right;" | 631.22
 
|style="text-align:right;" | 91.22%
 
|-
 
|style="text-align:left;" | Apr 2014-Mar 2017
 
|style="text-align:right;" | 187
 
|style="text-align:right;" | 412.27
 
|style="text-align:right;" | 482.22
 
|style="text-align:right;" | 85.5%
 
|-
 
|style="text-align:left;" | Apr 2014-Mar 2018
 
|style="text-align:right;" | 181
 
|style="text-align:right;" | 540.43
 
|style="text-align:right;" | 1,107.17
 
|style="text-align:right;" | 48.8%
 
|-
 
|style="text-align:left;" | Apr 2014-Mar 2019
 
|style="text-align:right;" | 151
 
|style="text-align:right;" | 411.91
 
|style="text-align:right;" | 536.96
 
|style="text-align:right;" | 41.3%
 
|}
 
 
 
=== Median budgets of interim video game cultural test certifications ===
 
 
 
{| class="wikitable"
 
!Year
 
!Median budget (£m)
 
|-
 
|style="text-align:left;" | 2014*
 
|style="text-align:right;" | 0.2
 
|-
 
|style="text-align:left;" | 2015
 
|style="text-align:right;" | 0.6
 
|-
 
|style="text-align:left;" | 2016
 
|style="text-align:right;" | 0.4
 
|-
 
|style="text-align:left;" | 2017
 
|style="text-align:right;" | 0.4
 
|-
 
|style="text-align:left;" | 2018
 
|style="text-align:right;" | 0.5
 
|-
 
|style="text-align:left;" | 2019 (Q1)
 
|style="text-align:right;" | 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 [https://www.bfi.org.uk/sites/bfi.org.uk/files/downloads/bfi-british-film-other-screen-sectors-certification-full-year-2018-v1.pdf here]
 
 
 
=== Final Certifications per Year ===
 
 
 
{| class="wikitable"
 
!Year
 
!Number
 
!UK/EEA spend (£m)
 
!Total budget (£m)
 
!UK/EEA spend as a % of total budget
 
|-
 
|style="text-align:left;" | 2015
 
|style="text-align:right;" | 116
 
|style="text-align:right;" | 180.9
 
|style="text-align:right;" | 265.6
 
|style="text-align:right;" | 68.1%
 
|-
 
|style="text-align:left;" | 2016
 
|style="text-align:right;" | 189
 
|style="text-align:right;" | 202.2
 
|style="text-align:right;" | 224.5
 
|style="text-align:right;" | 90.1%
 
|-
 
|style="text-align:left;" | 2017
 
|style="text-align:right;" | 212
 
|style="text-align:right;" | 248.8
 
|style="text-align:right;" | 277.5
 
|style="text-align:right;" | 89.7%
 
|-
 
|style="text-align:left;" | 2018
 
|style="text-align:right;" | 195
 
|style="text-align:right;" | 201.9
 
|style="text-align:right;" | 263.9
 
|style="text-align:right;" | 76.5%
 
|}
 
 
 
=== Interim Certifications per Year ===
 
 
 
{| class="wikitable"
 
!Year
 
!Number
 
!UK/EEA spend (£m)
 
!Total budget (£m)
 
!UK/EEA spend as a % of total budget
 
|-
 
|style="text-align:left;" | 2015
 
|style="text-align:right;" | 121
 
|style="text-align:right;" | 548.0
 
|style="text-align:right;" | 603.6
 
|style="text-align:right;" | 90.8%
 
|-
 
|style="text-align:left;" | 2016
 
|style="text-align:right;" | 176
 
|style="text-align:right;" | 401.7
 
|style="text-align:right;" | 466.9
 
|style="text-align:right;" | 86.0%
 
|-
 
|style="text-align:left;" | 2017
 
|style="text-align:right;" | 179
 
|style="text-align:right;" | 434.3
 
|style="text-align:right;" | 461.7
 
|style="text-align:right;" | 94.1%
 
|-
 
|style="text-align:left;" | 2018
 
|style="text-align:right;" | 170
 
|style="text-align:right;" | 517.6
 
|style="text-align:right;" | 1,106.4
 
|style="text-align:right;" | 46.8%
 
|}
 
 
 
=== Median budgets of interim video game cultural test certifications ===
 
 
 
{| class="wikitable"
 
!Year
 
!Median budget (£m)
 
|-
 
|style="text-align:left;" | 2015
 
|style="text-align:right;" | 0.6
 
|-
 
|style="text-align:left;" | 2016
 
|style="text-align:right;" | 0.4
 
|-
 
|style="text-align:left;" | 2017
 
|style="text-align:right;" | 0.4
 
|-
 
|style="text-align:left;" | 2018
 
|style="text-align:right;" | 0.5
 
 
|}
 
|}
 +
''Source: HMRC Management Information Systems (MIS)''
 +
Numbers are rounded to the nearest 5 and amounts to £1 million. Totals may not sum due to rounding.
 +
(*) Value suppressed as amount less than £1 million
  
==VGTR Resources==
+
== Resources ==
  
*[https://ukie.org.uk/a2f/VGTR Ukie - Access to Finance Guide]
+
*HMRC – [https://www.gov.uk/hmrc-internal-manuals/video-games-development-company-manual Video Games Development Company Manual]
*[https://www.gov.uk/hmrc-internal-manuals/video-games-development-company-manual HMRC – Video Games Development Company Manual]
+
*HMRC – [https://www.gov.uk/government/statistics/creative-industries-statistics-august-2020 Creative industries statistics]
*[https://www.bfi.org.uk/film-industry/british-certification-tax-relief/cultural-test-video-games BFI – The Cultural Test for Video Games]
+
*BFI – [https://www.bfi.org.uk/film-industry/british-certification-tax-relief/cultural-test-video-games The Cultural Test for Video Games]
*[https://www.gov.uk/guidance/corporation-tax-creative-industry-tax-reliefs#video-games-tax-relief-vgtr GOV.UK – Video Games Tax Relief]
+
*BFI – Research and Statistics
 +
*GOV.UK – Video Games Tax Relief
 +
*GOV.UK – Relevant Legislation

Revision as of 17:40, 13 January 2021

Understanding the Video Games Tax Relief

In the UK, qualifying companies can claim tax relief on the developemnt of video games. This video games tax relief (VGTR) is intended to address the underproduction of culturally European video games. Similar creative industry tax reliefs are available across the other creative sectors such as film, animation and theatre.

The value of the tax relief

VGTR is claimed on a company's annual tax return. It can take the form of either:

  • an additional deduction (up to 80% of core expenditure) from the company's profits, lowering the corporation tax that the company has to pay.
  • a payable tax credit worth up to 20% of total core expenditure on the game, when the project makes a loss.

"Core expenditure" is what’s spent on designing, producing and testing the game. Only expenditure incurred in the UK and EEA is eligible for tax relief. Detailed information on the relief and its value can be found in HMRC's video games development company manual.

Qualifying for VGTR

VGTR can only be claimed by a video games development company (VGDC) that meets the following requirements.

  • The company is incorporated at Companies House* before full production begins on the game.
  • The company is actively engaged in planning and decision-making.
  • The company directly negotiates, contracts and pays for rights, goods and services.

VGTR can only be claimed on video games that meet the following requirements.

  • The game is intended for supply to the general public.
  • At least 25% of core expenditure is incurred within the UK or EEA.
  • The game is certified as British by the British Film Institute (BFI) through the Cultural Test.

NB If you are registering a games company at companies house, please consider using the SIC code 62011 if you are a developer and 58210 if you are a publisher.

The Cultural Test

The cultural test is a 31-point assessment to determine if a video game is culturally British, administered by the BFI. The pass mark is 16. There are similar tests for some of the other creative sectors, dating back to 2007.

Video games that qualify under the cultural test are issued with a certificate which much be included with the company's tax return when claiming tax relief. Interim certificates are awarded to games that are currently in development. Final certificates are issued to games that are completed and released. The BFI can advise directly on more complex games, such as those following a games-as-a-service model. Cultural Test applications are made through the BFI's website, where you can also find more detailed information.

The content of the cultural test is as follows.

Section A – Cultural content
A1 Set in the UK, an EEA state or an undetermined location (points awarded for undetermined settings are capped at 3) Up to 4 Points
A2 Lead characters are UK/EEA citizens or residents or are characters from an undetermined location (there is no points cap for undetermined characters) Up to 4 Points
A3 a) British/EEA story or subject matter OR b) Video game is based on British or EEA underlying material 4 points
A4 Original dialogue or game text is presented 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 project leaders is a UK/EEA citizen or resident 1 point
D2 1 of the 3 lead scriptwriters is a UK/EEA citizen or resident 1 point
D3 1 of the 3 lead composers is a UK/EEA citizen or resident 1 point
D4 1 of the 3 lead artists is a UK/EEA citizen or resident 1 point
D5 1 of the 3 lead programmers is a UK/EEA citizen or resident 1 point
D6 1 of the 3 lead designers is a UK/EEA citizen or resident 1 point
D7 At least 1 of the 7 key Heads of Department is a UK/EEA citizen or resident 1 point
D8 At least 50% of the development team are UK/EEA citizens or residents 1 point
Total 31 points

In the context of the cultural test, "undetermined" refers to science fiction, fantasy and generically themed places/characters such as a "forest level".

Economic Impact of VGTR

In the BFI’s 2018 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.

Number of applications and reported budget

This table shows the combined total of interim and final certificates issued in each year alongside the budgets and UK expenditure of projects as reported by applicants. Adapted from tables published by the BFI's Research and Statistics Unit. More detailed breakdowns and further information can be found at that link.

Year Number UK expenditure (£m) Total budget (£m) UK/EEA spend as a % of total budget
2015 237 728.9 869.2 83.9%
2016 365 603.9 691.4 87.3%
2017 391 683.1 739.1 92.4%
2018 369 721.7 1,410.4 51.2%
2019 381 977.6 1,664.6 58.7%

Tax relief paid to games companies

According HMRC's Creative industries statistics commentary, published August 2020, a total of £444 million has been paid out to 1,460 claims since the relief was launched in April 2014. In 2019-20, 350 claims were made for a total of £121 million, which represented 605 games. The table below shows the number of VGTR claims and the amount of relief paid on receipts basis, split by size of claim for the past three years. For further detail and alternative breakdowns, please see HMRC's Creative industries tax relief statistics tables document.

2017-18 2018-19 2019-20
Size of claim Number Amount (£m) Number Amount (£m) Number Amount (£m)
Up to £5,000 65 (*) 50 (*) 40 (*)
£5,001 to £10,000 30 (*) 25 (*) 30 (*)
£10,001 to £25,000 80 1 65 1 60 (*)
£25,001 to £50,000 40 1 55 2 50 2
£50,001 to £100,000 30 2 45 3 50 3
£100,001 to £500,000 65 13 55 12 75 18
£500,001 to £1,000,000 10 8 25 14 15 11
Over £1,000,000 25 77 25 72 30 85
Total 345 103 350 104 350 121

Source: HMRC Management Information Systems (MIS) Numbers are rounded to the nearest 5 and amounts to £1 million. Totals may not sum due to rounding. (*) Value suppressed as amount less than £1 million

Resources