VGDC55020 - Calculation: maximum amount of core expenditure subject to claim
S1217CF, S 1217CG Corporation Tax Act 2009
The amount of Video Games Tax Relief (VGTR) is based on the European core expenditure of a video game trade. The Video Games Development Company (VGDC) will receive an additional deduction of up to 80% of the total core expenditure incurred.
A VGDC can claim VGTR on the lower of:
- 80% of total core expenditure, and
- the actual European core expenditure incurred.
European core expenditure is the amount of core expenditure (VGDC50010) incurred by the VGDC that is also European expenditure (VGDC50050).
In this guidance the amount on which the VGDC is entitled to claim VGTR is termed enhanceable expenditure.
Example 1: core expenditure all European
A VGDC incurs £200k of core expenditure on a video game, all of it in the UK or EEA.
Actual European core expenditure > 80% of total core expenditure.
The VGDC can claim VGTR on 80% x total core expenditure. Enhanceable expenditure is £160k.
Example 2: core expenditure part European, part non-European
A VGDC incurs £400k of core expenditure on a video game, of which £250k is European expenditure. The remainder is incurred in Canada.
Actual European core expenditure < 80% of total core expenditure.
The VGDC can claim VGTR on actual European core expenditure. Enhanceable expenditure is £250k.
Example 3: co-development
A UK company incurs £500k of core expenditure on a video game. Its co-developer incurs a further £50,000 of core expenditure on the video game.
Actual European core expenditure > 80% of total core expenditure.
The VGDC can claim VGTR on 80% x total core expenditure incurred by the VGDC. Enhanceable expenditure is £400k.
Even though combined core expenditure on the video game (by both co-developers) was £550k, the limit is 80% of the total core expenditure incurred by the VGDC.