Claiming game tax relief in the UK is an essential process for game developers looking to capitalize on financial incentives offered by the government. This relief is part of the UK’s efforts to support the creative industries, ensuring that the video game sector remains competitive and vibrant. This article will guide you through the eligibility criteria, the process of claiming, and tips to maximize your claim, with insights from Tech Accountants who are specialists in the field.
Introduction to Video Games Tax Relief (VGTR)
Video Games Tax Relief (VGTR) was introduced in April 2014 to support the UK’s video game development sector. VGTR allows qualifying companies to claim a deduction in their taxable profits or, in some cases, receive a payable tax credit. This incentive is designed to encourage innovation and creativity within the UK video game industry, making it a more attractive place for developers and entrepreneurs.
Eligibility Criteria
To be eligible for VGTR, there are several criteria that your project must meet. Firstly, the video game must be certified as a British video game by the British Film Institute (BFI), meaning it must pass a cultural test or qualify through an interim certification. The game must also be intended for supply to the general public, and at least 25% of the core expenditure must be incurred on goods or services provided from within the European Economic Area (EEA).
Additionally, the game development company must be responsible for the planning, designing, developing, testing, and producing the game. The company must also directly negotiate, contract, and pay for rights, goods, and services relating to the game. This is where Accountants for Game Companies play a critical role, ensuring that all financial and contractual aspects are properly managed.
The Process of Claiming VGTR
Step 1: Obtain Certification
The first step in claiming VGTR is to apply for certification from the British Film Institute (BFI). This involves completing the cultural test application form, demonstrating how the game reflects British culture, or qualifies through co-production agreements. Interim certification can be sought during development, with final certification required to claim the relief.
Step 2: Calculate Your Costs
Identify and calculate the core expenditure related to the development of the game that qualifies for VGTR. This includes costs directly associated with the production of the game, such as designing, producing, and testing. Remember, at least 25% of these costs must be incurred within the EEA. Expertise from Accountants in London can be invaluable in accurately calculating and substantiating these costs.
Step 3: File Your Claim
Include your VGTR claim as part of your Company Tax Return. You’ll need to submit the tax return to HM Revenue and Customs (HMRC), including the Video Games Tax Relief claim and any supporting documentation, such as the BFI certification and detailed expenditure records.
Tips for Maximizing Your VGTR Claim
- Early Planning: Engage with a tax advisor or accountant specializing in VGTR early in the development process to ensure all eligible costs are accurately tracked and maximized.
- Maintain Detailed Records: Keep meticulous records of all development costs, including invoices and contracts, to substantiate your claim.
- Interim Certification: Apply for interim certification to assess your eligibility early on, allowing you to plan your expenditure to meet the qualifying criteria.
- R&D Tax Credits: Consider if you can also claim Research and Development (R&D) tax credits for additional financial benefits, as some development activities may qualify for both incentives.
- Seek Expert Advice: The process can be complex, and regulations may change. Consulting with experts who specialize in VGTR can provide valuable guidance and ensure you claim the maximum relief possible.
Conclusion
Video Games Tax Relief represents a significant opportunity for game developers in the UK to reduce their tax liabilities and support the growth of their projects. By understanding the eligibility criteria, the process of claiming, and how to maximize your claim, your company can benefit from this valuable incentive. Engage with professionals, plan early, and maintain detailed records to take full advantage of VGTR, fostering innovation and creativity in the UK’s video game industry.
