How to apply for Video Games Tax Relief and make a VGTR claim
Video Games Tax Relief is not easy to understand -- here's our in-depth guide to making a VGTR claim and passing the cultural test
Paperwork and taxes are unlikely to be at the top of the list of what game developers like to do. And yet, there are some bits of admin that lead to undeniable advantages. Video Games Tax Relief (VGTR) is one of them.
VGTR is a simple way for studios to reduce the monetary risk they take when developing a game in the UK, as it offers a rebate against production spend.
Ukie's head of policy and public affairs Tim Scott, who participated in the creation of VGTR when he was a civil servant, describes it as follows: "It's a form of financial support from the government on expenditure for developing video games in the UK. So you either get it as a write off on your taxes or as a payable cash credit."
Launched in April 2014, it is part of broader measures known as the creative industry tax reliefs that apply to film, TV, animation, and more. The British Film Institute (BFI) is the institution that manages the qualification process (including the famous cultural test), with companies that apply then receiving tax relief from HM Revenue & Customs (HMRC).
"In 2014 when the VGTR came into effect, we were only getting four or five [applications a month] to begin with," head of certification at the BFI Anna Mansi says. "Generally now, we get about 20 to 30 a month. We have been picking up quite a few more recently, so maybe 30 or 40, but there can be peaks and troughs. They are mostly from small and indie developers, which is great, and then we will also receive applications from one or two of the bigger studios."
As a comparison, Mansi says the BFI gets around 50 to 60 applications a month for the film tax relief.
HMRC reported in July 2018 that, in the fiscal year 2017/18, £108 million of VGTR was paid in response to 345 claims and, since the introduction of VGTR in 2014 up to July 2018, £227 million had been paid out in response to 770 claims.
The games industry is also the only sector for which tax relief can be claimed on UK or EEA expenditure. And while the uncertainty of Brexit looms over VGTR, the European Commission confirmed in 2017 that it will remain in place until March 31, 2023.
The process to make a VGTR claim is two-fold: first there's the certification process, during which you'll have to prove that the project qualifies as British, then there's the claim itself.
"A common challenge is understanding what is required," Scott says. "So it's probably easy to talk about common misconceptions: 'it's awfully complicated' or 'the cultural test is incredibly rigid' or 'I need an accountant and they need to do really complicated things I'm not comfortable with'. The reality is that it's not the case.
"But, in theory, anyone who is running a business will know how much money they're spending, what they're spending it on, and when they're spending it, and be able to prove it and fill in the forms. In practice, there is plenty of support, in particular from the BFI Certification Unit and from HMRC, to help you through the process."
So how much money do you get back? How difficult is the cultural test? What documents do you need to attach? The answers to all your questions, and more, are right here.
Table of contents
What you need to know about VGTR and the certification process
- Can you break down the VGTR process for me?
- What's an interim certificate and why should I get one?
- What documents do I need?
- Do I need to set up a company?
- When should I start the certification process and make a claim?
- How long does it take?
- I have a publisher: should it be the one making the claim?
- Can I claim for past projects and how far back can I claim?
- Are there games that can't qualify for VGTR?
How to apply for and pass the cultural test
- What is the cultural test for video games?
- What are the different sections of the cultural test and how do they work?
- Will I have to change my game to pass the cultural test?
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