Video Games Expenditure Credit

What is Video Games Expenditure Credit?

The Video Games Expenditure Credit (VGEC) is a UK tax initiative designed to bolster the video game industry by offering a refundable tax credit on eligible production costs to companies involved in video game development.

Key Benefits of VGEC

The VGEC provides a range of advantages tailored to the needs of game developers:

Rebate: Developers can claim up to 34% of qualifying UK development expenses. The credit is treated as income and therefore taxable at the current rate of corporation tax of 25%, meaning that the net benefit is 25.5% of the claim.

The claim is limited to the lower of:
80% of total core expenditure; or
Total UK core expenditure

Wide Applicability: The credit is available for most types of video games, from small indie projects to large-scale blockbuster titles, provided they meet the eligibility criteria.

Cash Flow Support: Since the credit is refundable, even loss-making studios can benefit, ensuring financial stability throughout development.

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A man wearing headphones and a microphone is playing a video game.

Video Games Expenditure Credit Eligibility Criteria

To access the VGEC, developers must ensure their project meets specific requirements. These are:

Cultural Test

The game must pass the UK Video Games Cultural Test, administered by the British Film Institute (BFI). The test evaluates whether the game has a cultural connection to the UK based on:

Storyline, Characters, and Setting: The game should include British cultural references or have a storyline set in the UK.
Use of UK-Based Development Teams and Resources: A significant portion of the game’s development should be undertaken in the UK, utilising local talent and services.

Passing this test certifies a game as a British video game, making it eligible for VGEC.

UK Development Expenditure

At least 10% of the game’s core development costs must be used and consumed within the UK.

Commercial Intent

The game must be developed for commercial release. Projects such as internal prototypes, educational tools, or non-commercial games (e.g., free-to-play hobby projects) do not qualify for VGEC.

Eligible Development Company (EDC)

To claim VGEC, the company must:

Be registered in the UK as a business entity.
Be actively involved in the game’s design, production, and testing.

What is qualifying core expenditure for Video Games Expenditure Credit

The core expenditure for the Video Games Expenditure Credit includes costs that are directly related, such as:

Eligible Costs:

Design, production, and development costs related to the game.
Staff salaries, contractor fees, and overheads that are directly related to game development.
Costs for software and tools specifically used in the development process.

Excluded Costs:

Marketing, distribution, and ongoing maintenance.
General administrative and corporate overheads.
Costs related to hardware or console development.

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Our Expert Services

Navigating the VGEC process can be complex, but our team of experts are here to help maximise your claim and streamline the application process. We offer:

Eligibility Review: We assess your project to determine if it qualifies for VGEC.
Cultural Test Support: Assistance with preparing and submitting your BFI application to ensure your game meets the necessary criteria.
Claim Submission: Preparation and submission of all financial documentation to HMRC on your behalf, ensuring accuracy and compliance.
Compliance Assistance: We help you adhere to HMRC guidelines, minimising the risk of errors or claim rejections.

Ready to Transform Your Game Development?

Discover how the Video Games Expenditure Credit (VGEC) can fuel your studio’s growth and innovation. Contact us today for a no obligation consultation and take the first step toward unlocking your project’s full potential!