By Steven Sandford, Director at Davis Grant
The UK tech industry is booming, contributing more than £184 billion a year to the economy. Although the sector is often discussed as a whole, there are a number of distinctive industries within tech, which often benefit from their own grants and reliefs.
One such sub-sector is the video game industry. UK games studios have played an important role in the release of some of the world’s biggest and most profitable video games series.
In recognition of this, the Government offers a unique Video Games Tax Relief, which can be used by eligible businesses to reduce the amount of Corporation tax that they pay.
A company can benefit from this relief if the game they produce:
- Certified as British by the British Film Institute (BFI) and pass a ‘cultural test’
- Intended for supply to the general public
- At least 25 per cent of core expenditure is on goods or services provided from within the European Economic Area (EEA).
The company must also be:
- Be actively engaged in planning and decision-making; and
- Directly negotiate, contract and pay for rights, goods and services.
This relief is not available where a game is produced for:
- Advertising or promotional purposes; or
- The purposes of gambling
How much tax relief is on offer?
Companies with eligible video game projects can claim an additional deduction to reduce their profits or to increase a loss, which will reduce the amount of any Corporation Tax.
Where a loss is made, some or all of this loss can be surrendered for a payable tax credit at a rate of 25 per cent.
The additional deduction will be the lower of either:
- 80 per cent of total core expenditure; or
- The amount of core expenditure on goods or services that are provided from the EEA.
This relief can be claimed via the company tax return, by calculating the amount of additional deduction due to your company or any payable credit due
You can make, amend or withdraw a claim to creative industry tax reliefs, such as the Video Game Tax Relief, up to one year after the company’s filing date.
If you would like help to claim this relief, or any other grants or reliefs available to the tech sector, please contact us.