What is the difference between Video Game Tax Relief (VGTR) and Video Games Expenditure Credit (VGEC)?

There are always winners and losers when tax changes take place, but here are the basic differences between the old VGTR and the shiny new VGEC

If you were to ask ChatGPT for an insight into the differences between the new Video Games Expenditure Credit (VGEC) and the old Video Game Tax Relief (VGTR), your answer would be that they both serve different purposes and VGEC has yet to be implemented. On that basis you have some comfort that this was written by a person and not by AI!

The decision to change the way tax credits work in the gaming sector, and the nuanced change in name of the relief, was met with a collective ‘so what’ from the industry and its advisors. However, whilst the name change itself is nuanced, the changes are significant and have led to material change in the way studios are structuring operations.

What you need to know about Video Game Tax Relief (VGTR) and Video Games Expenditure Credit (VGEC)

There are always winners and losers when tax changes take place, but here are the basic differences between the old VGTR and the shiny new VGEC:

1. The limit on subcontractor expenditure is removed.
2. Expenditure must be ‘used and consumed in the U.K.’ – this means costs relating to overseas subcontractors are not allowable.
3. The rate of relief is 34% – however, this relief is taxable income (meaning at 25% tax paid on it – effective tax credit of 25.5%).
4. Minimum eligibility requirement – at least 10% of expenditure must be ‘used or consumed in the U.K.’
5. From 1 April 2024 an additional information form is required to be filed with the claim to HMRC.

And what stays the same?

• VGEC retains the 80% cap on qualifying expenditure
• The BFI cultural test still applies
• Core costs definitions remain broadly the same

When does Video Games Expenditure Credit (VGEC) come into effect?

• Games started and expenditure incurred prior to 1 April 2025 can still be used under the old VGTR scheme until April 2027.
• Games commencing after 1 April 2025 must be under VGEC.

Those studios at the early planning stage for future projects must now plan how they will structure and fund projects, and understanding the intricacies of the VGEC is key to maximising any claim.

Do get in touch with me, Andrew Douthwaite, if you would like specific advice on the Video Game Tax Relief (VGTR) or the Video Games Expenditure Credit (VGEC).

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