This is a freeview 'At a glance' guide to Video Games Development relief.

Video Games Development tax relief is a tax relief that can be claimed by game production companies in respect of expenditure incurred in the development of British video games. The relief provides an enhanced deduction of expenditure for Corporation Tax relief or alternatively a repayable tax credit may be claimed.

This relief is part of the UK's system of Creative industries tax reliefs.

At a glance

Relief applies for video games:

  • That are intended for the supply to the general public.
  • That pass the cultural test and are certified by the Secretary of State as British video games.
  • Where at least 25% of the core expenditure on the game is incurred on goods and services provided from within the European Economic Area (EEA).


HMRC have included guidance relating to the impact of furlough payments during the COVID-19 pandemic, including those met by the Government through the Coronavirus Job Retention Scheme (CJRS), at VGDC50130.

What is a video game?

A video game, in terms of this relief, is an electronic game (software) and includes the development of a game's soundtracks.

A video game is an electronic game that is played through a video device, such as television, monitor, mobile phone, tablet device or handheld portable games machine. 

The video game is the software and other electronically stored content and information, including the audio content, such as sound effects and soundtrack, and any filmed or animated sequences for narrative purposes or options to adapt the game to suit the desires of the player.

The game does not include the video device and equipment hardware that are required to play the game. Where a video game is designed to be played on a specific console such as an 'X-box', 'Wii', 'Playstation' or handheld device, such as 'Nintendo DS', the development of the hardware is not treated as part of the development of the game. 

A game must have sufficient capability for a player to directly control actions and events in some way. There must be an uncertain outcome for the product to be a game, where the player’s actions have a meaningful result in the outcome.

Excluded content

There is no relief for games produced for the purposes of advertising, promotion or gambling. Games that contain advertising are not necessarily excluded, nor are games that include an element of gambling unless there is a facility to pay out actual cash.

Which companies qualify?

  • A company paying UK Corporation Tax is a qualifying Video Games Development Company (VGDC) if it produces the video game.  
  • The relief is not available to partnerships or individuals.
  • Each video game is treated as a separate trade. 
  • There can only be one VGDC per game, if two companies are developing a single game, only the company most directly engaged in the qualifying activities can claim the relief.

A VGDC is:

  • Responsible for designing, producing and testing the video game.
  • Actively engaged in planning and decision-making during the design, production and testing of the video game.
  • In charge of negotiating, contracting and paying for rights, goods and services relating to the video game.

Activities may be subcontracted to third parties, although there is a limit to the qualifying payments which can be made to subcontractors. Subcontractors are unlikely to qualify as VGDCs.

Qualifying expenditure

Expenditure must be 'core expenditure' in relation to the video game, this includes expenditure incurred on:

  • Designing, producing and testing the video game.

Excluded expenditure, includes expenditure incurred in:

  • Designing the initial concept of the game.
  • Debugging a completed game.
  • Carrying out maintenance on a completed game.

Any costs in respect of games hardware or costs once a game is completed and ready for supply to the public such as entertaining, advertising and marketing completed games do not qualify for relief.

Cost of auditing, bank interest and charges and insurance are not counted as core expenditures.

Costs incurred in the creation of an asset can be deemed to be revenue in nature.

Capital Allowances may be available for other capital expenditure in the normal way.

There is no relief for costs that have also qualified for R&D relief.

Video games income

In calculating a profit or loss from video games development, income includes:

  • Receipts from the sale of the video game, or rights in it.
  • Royalties or other payments for the rights to use the video game or aspects of it, for example, characters or music.
  • Payments for rights to produce games or other merchandise.
  • Receipts by way of a profit share agreement.

Video Game Tax Credits (VGTCs) due or paid to the VGDC in connection with a video game are not regarded as 'income from the relevant video game'.

How to claim

A claim is made under Corporation Tax Self Assessment.

A claim can only be made where at least 25% of the core expenditure on the game is incurred on goods and services provided from within the EEA.

The Secretary of State needs to certify that a video game is a 'British video game' for the relief to apply. This involves meeting the 'cultural test' and obtaining a certificate from the British Film Institute which has published details of the requirements.

A VGDC can then claim VGTR on its enhanceable expenditure which is the lower of:

  • 80% of total core expenditure.
  • The actual EEA core expenditure incurred.

The amount of VGTCs repayable in respect of the surrenderable loss for any accounting period is 25% of the lower of:

  • The amount the company’s available loss for the accounting period.
  • The enhanceable expenditure for that period.

For example

A VGDC company incurs development costs on a new game of £100,000. Of this £50,000 is spent in the EEA. It has no income in this Corporation Tax period.

Its enhanceable expenditure is, therefore, £50,000, the lower of 80% of £100,000 and £50,000.

In this accounting period, its allowable deduction for Corporation Tax is £150,000 i.e. actual expenditure of £100k plus its enhanceable expenditure of £50,000.

It now has a choice. It can carry forward this loss to the next accounting period or may surrender it for cash.
Its surrenderable loss is the lower of its available loss, that is £150,000 or its enhanceable expenditure, that is £50,000.

Its repayable VGTC is, therefore, £12,500. The balance of its available loss (£100, being £150,000 less £50,000 surrendered) is available to carry forward.

It is not necessary to claim the whole loss.

When making a claim you should provide:

  • A British cultural certificate from the British Film Institute (BFI). If the game is still in development, you can provide an interim certificate and send the final certificate when the game is complete.
  • Statements of the amount of core expenditure, split by EEA and non-EEA expenditure.
  • A breakdown of expenditure by category.

Small print

HMRC's Video Development Company Manual was published in January 2015 

Part 15B CTA 2009, that is sections 1217A to 1217EC 

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