VGDC55010 - Calculation: introduction
S1217AB Corporation Tax Act 2009
Video Games Tax Relief (VGTR) is only available to Video Games Development Companies (VGDCs) that make qualifying video games.
Qualifying video games
A company meeting the definition of a VGDC (VGDC10110) is entitled to claim VGTR on European core expenditure (VGDC50010) on a video game provided that:
- the video game is intended for supply (VGDC40020),
- the video game qualifies as a British video game (VGDC40030), and
- 25% or more of the total core expenditure is European expenditure (VGDC40040).
Benefits of VGTR: additional deduction and surrenderable tax credit
A VGDC entitled to VGTR can claim an additional deduction in computing its taxable profits relating to a video game trade. See VGDC55020 and VGDC55030 for details of how the amount of the additional deduction is calculated.
The additional deduction can:
- reduce the profits of the video game trade income arising from the sale or exploitation of the video game (so that the company pays less tax); or
- create or increase a tax loss, which the company can surrender in return for a payable Video Game Tax Credit (VGDC55100).
VGTR only available to companies
VGTR is a corporation tax relief and so is not available to individuals, either alone or within partnerships. It is also not available to investors, financial institutions and those whose involvement in video game making is confined to providing or arranging finance.
The purpose of targeting the relief exclusively at VGDCs is to ensure that Government support is delivered directly to video game development and is not used as a means of avoiding tax. It also ensures that such support is delivered to video game development activity in its entirety rather than to separate video game development activities.
Core expenditure before 1 April 2014
VGTR was introduced from 1 April 2014. Only expenditure after this date is eligible for an additional deduction.
VGTR is available to VGDCs which commenced development of a video game before 1 April 2014, on the European core expenditure provided after that date.