Figures published by the British Film Institute (BFI) in February show that 32 games have received final or interim certification with a combined spend of £47m in the UK. However, many companies have not applied for certification as either they aren’t aware of the relief or don’t know that they are eligible for it.
What is Video Games Tax Relief?
It’s a tax relief for game development announced by the Government back in 2012 but which did not come into effect until 1 April 2014.
The relief can be claimed by any company that is responsible for the design, production and testing of a game and directly negotiates, contracts and pays for rights, goods and services in relation to that game.
-The game must be intended for release to the public,
-At least 25% of the expenditure on the game must be incurred in the European Economic Area (EEA) and
-The game must also qualify as ‘culturally British’.
What qualifies as ‘culturally British’?
The aim of the relief is to ‘promote the sustainable production of culturally significant video games in the UK’.
As a result, the game must pass a cultural test administered by the BFI.
The cultural test is a points-based system whereby the development needs at least 16 out of a possible 31 points to qualify.
The points are awarded in 4 categories – Cultural Content, Cultural Contribution, Cultural Hubs and Personnel – for such things as being set in the UK or EEA, representing British heritage or diversity, having at least 50% of the music/voice recording taking place in the UK or having project leaders, programmers, designers, etc. who are EEA citizens or residents.
The company can apply to the BFI for an interim certification at any point before or during development which is then valid for 3 years.
A final application must be made once the video game is complete.
How is the relief calculated?
If it qualifies, the company can make a deduction from its taxable profits of the lower of:
-Core expenditure (being expenditure on design, production and testing of the game) that is also EEA expenditure; and
-80% of total core expenditure.
If the company makes a loss after making this deduction, then the company can claim a tax credit of 25% of the lower of the actual loss or the amount of core expenditure in the period.
The company will then claim for the relief on its Company Tax Return for the period.
So how can Alliotts help?
If you are a games company looking to take advantage of this relief, or unsure if you qualify, please give us a call.
Why miss out on the opportunity to get tax relief on your video game? Our specialists can go through the process and assist you with the preparation of your company’s corporation tax return.
Contact us now on 020 7240 9971 for more information or to find out what you need to do next.