Gaming Industry Tax Credits: what you need to know!
We now have gaming industry tax credits to rival those that have been available for film production and research and development companies for years.
Extra investment over the past six years has exceeded all expectations, with game companies claiming over £444 million from the UK Video Game Tax Relief scheme since it was launched in 2014.
Here’s all you need to know about games tax relief:
What businesses can claim this relief?
The tax relief is only available for limited companies registered in the UK. This means that if your business is an LLP, partnership or a sole trade, you won’t be able to claim this.
The company must be responsible for designing, producing and testing the video game. Alternatively, you would need to be directly involved in the negotiation, contracting and payment for the services in developing the game i.e. you manage the subcontract of the development but have overall responsibility for the development of the game.
When can I start to claim this relief?
You can claim for relief on your Company Tax Return. You may make, amend or withdraw a claim to creative industry tax reliefs up to one year after the company’s filing date.
HMRC may agree to accept late claims in some circumstances.
What types of games can you claim the relief on?
The game must have been intended for supply to the public from the outset so you can’t claim for a game that wasn’t originally intended for the public that you then change partway through its development.
You also can’t claim the tax relief on games that are for gambling or advertising purposes.
How much can I claim back on games relief then?
The relief is worth up to 20% of the qualifying costs. This is claimed as either a reduction in the company tax bill or if the company has made a loss, is paid to the company as a cash refund. Loss-making games can surrender the loss for a payable tax credit at a rate of 25%.
What costs can I claim under this relief?
There is no minimum level of spend to qualify for this relief. The costs that count as “qualifying expenditure” are “core” costs – those that are essential for the design, production and development of the game i.e., any costs that you can show were directly attributable to making the game. This does not however include costs that you spend on initial concept design or on debugging or maintenance on a completed game i.e., all the initial costs and any ongoing maintenance costs once the game has been delivered.
In addition, at least 25% of the money spent on producing the game must be “UK Expenditure”. The definition of UK expenditure is that the money is spent on UK registered businesses.
What else do I need to know?
There is a further test that needs to be passed to qualify – the “cultural test”. This is similar to the cultural test that is used in the film tax relief and to qualify you need to reach a minimum number of points.
Points are awarded for the following categories:
- Is the game set in the UK?
- Are the in-game characters from the UK? (James Bond should qualify!)
- Does the game depict a “British” story?
- What percentage of the original game dialogue was recorded in English?
- Does the game promote UK culture?
- Are key members of the production team either citizens of the UK or normally live in the UK? You are looking at project leaders, scriptwriters, lead composers, actors, lead programmers and lead designers as key members of the production team.
What happens next?
Full and detailed guidance on how to make gaming industry tax credits can be found at gov.uk.
If your project does meet the qualifying criteria, keep a note of the costs associated with making the game.
If you want further guidance on how you could benefit from games tax relief or any of the other creative industries tax reliefs (research and development tax credits, film tax relief, animation tax relief, and television tax relief) then contact us at 01273 739592 or firstname.lastname@example.org