What you need to know about VGTR and the certification process

Video Games Tax Relief is not always easy to understand, which is why we've put together an in-depth guide to making a VGTR claim and passing the cultural test.

VGTR is a simple way for studios to reduce the monetary risk they take when developing a game in the UK or the EEA, as it offers a rebate against production spend.

Our guide is in three parts. If you want to read an introduction to video games tax relief, head to the VGTR hub page, where you will also find the full table of contents. You can also choose to jump immediately to the second part, How to apply for and pass the cultural test, or to the conclusion, How to make the VGTR claim.

Here's what you will find on this page, which is dedicated to everything 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?
• Should my publisher be 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?

Can you break down the VGTR process for me?

Ella Romanos is the co-founder of Fundamentally Games, which assists developers with their funding strategies, among other things. She says that you must first apply for the VGTR certificate for approval, before you can make the actual claim.

"Applying for the certificate you can do at any point -- before production, when production starts, whenever you want," Romanos says. "The BFI manages the certification process, while the actual claim is done through HMRC as part of your account"

The certification process is actually going to be the bigger task here, as it includes the cultural test (more on that on this page of our guide) that will give you the British qualification that's needed to make a VGTR claim. HMRC then has a specialist unit to deal with VGTR -- the Manchester Creative Industries Unit, which works very closely with the BFI.

Head of certification at the BFI Anna Mansi details how things are handled once your certification papers reach her team: "Once an application comes in, it's allocated to one of the analysts in the team. We have three video games analysts: Julia [Brown], Stuart [Burnside] and Colm [Seeley].

"Once it's allocated then that person will have all the contact with the applicant and they will have an open dialogue -- we may need to speak to them on the phone for instance, just to clarify any points. We're always there to help people. And we do pre-meetings and pre-phone calls with people if they're not sure about something."

What's an interim certificate and why should I get one?

You can apply for tax relief once you have the certificate from the BFI. There's two types of certification: the interim certificate and the final certificate. The former can be obtained at any point of the development process and the latter can only be obtained once the game is finished. Whether you ask only for final certification or for multiple interim certificates, or all of the above, is entirely up to you.

"You can apply at pre-development stage," Mansi says. "Let's say you have a one year development period. You've done six months worth of work and you've spent £200,000; as long as you've got that certificate from us, you can make a claim on that £200,000 with an interim certificate. Once the game is complete, you can then apply for final certification. It's the same process."

"The benefits to doing that extra work far outweighs the time you put in it"Tom Hegarty, Roll 7

That means you'll have to do the paperwork each time, which is both a blessing (it's the same paperwork so once you've done it once, it's fairly easy to replicate) and a curse (you have to do the paperwork for every single application).

OlliOlli developer Roll7 is a VGTR regular. Production and finance director Tom Hegarty says the studio made its first VGTR claim for the tax year 2015 -- "and some of 2014 as well" -- as the scheme had just launched. And the studio is currently going through the early stages of the process for its next project.

When asked if he felt that VGTR was complicated when he first went through the process, Hegarty immediately says no.

"The only complexities came because we were doing a case involving 2014 and 2015, so the two tax years," he says. "But now we've got past that point and we can do every tax year in line with our fiscal year. It's a straightforward process. I still need an accountant to help me, so it's by no means a simple tick-box exercise. But if you have a good accountant, you should be able to go through the process without too much fuss. The benefits to doing that extra work far outweighs the time you put in it."

And Hegarty strongly advises to take advantage of the interim certificates system instead of going through the process only once a year.

"You don't have to wait until the game's release," he adds. "You can actually make a claim during development which can potentially benefit the development process."

What documents do I need?

Everything you need to attach to your application is detailed on the BFI's website. You can find guidance notes in this document created by the organisation as well.

The application form is right here, and that's where you should start. It's worth noting that you'll need to fill a new application form for final certification, even if you have done interim claims. The director or secretary of your studio will also need to fill a statutory declaration, which is a legal document asserting who you are and in what capacity you're claiming VGTR.

In terms of documents to attach, you will need scripts, game design documents, visual material (screenshots or gameplay footage, for instance), and budgets, among others. If you're applying for final certification, you'll need to attach a copy of the game. This part of the task may sound daunting, but fear not, the BFI has created templates to help you through the process and will adapt what is required to where you are in the development process.

"We will need to see a budget, game design document, that kind of information," Mansi says. "You may not be at the stage where you have specific game design documents, but if you've got some visuals that is helpful. We need to be able to see where it is set. Even if you only have an early prototype, that's fine. Send us a shot of that.

"And we have templates on our website as well -- we've done a mockup of a schedule and a budget in case you're quite a new business. And you can see it is pre-populated to be helpful as an example."

Every document you complete, including the application form and the statutory declaration, will need to be printed and sent to the BFI.

Do I need to set up a company?

To be able to make a VGTR claim you need to register a company. Even if you're a solo developer working on a passion project in your spare time, you still need to be registered.

"You have to have a company because the money that HMRC will pay out is paid to that company," Mansi says. "But it's very simple to set up the company. You just register with Companies House. It costs about £12 and it takes about 48 hours. Setting up a company is the most important thing."

When should I start the certification process and make a claim?

As already touched upon by our interviewees, you can make more than one claim a year thanks to the interim certificate process. There isn't one specific moment of the development process where you should be making the claim.

"The beauty of the way in which it's set up is that you can make multiple claims and you are not bound by financial years," Ukie's head of policy and public affairs Tim Scott says. "As soon as you start incurring expenditure against the eligible criteria, then technically, as long as you've got an accounting mechanism to prove you've spent the cash, you can start claiming it, making multiple claims.

"If you're happy just putting in one claim at the end of each year, go for it. If you want to do multiple claims to balance to books, then you can do that as well."

According to Mansi, making multiple claims a year works well for smaller companies. You can just set your own accounting period.

"If you spend £20,000 in the first three months, you can claim against that and do another claim three months later and then another claim three months later, and so on. You can make a claim as many times as you need to -- although 12 claims a year could be onerous. But there is this flexibility in the process to allow you to do that. If you're fully cash flowed and don't need the tax relief until the end, then you just make your application for final, but otherwise I'd say do it at an early stage."

How long does it take?

One thing that can have an impact on the moment you make a VGTR claim is the time it takes for the certification application to be processed. With the tax relief program having grown so much in the past few years, the waiting time has also increased for an application to complete the process.

"It takes us about four to six weeks to process, just purely because we are so busy," Mansi says. "I have a team of ten. There used to be three of us, and we just did the film [tax relief], and I'm already begging for more staff because we just have to do so much. But I'm glad because the word is spreading out, to all sorts of size companies, which is fantastic. I think people are becoming more confident about approaching us."

"VGTR is set up so that you can make multiple claims and you are not bound by financial years"Tim Scott, Ukie

It's then another six to eight weeks for HMRC to process the request, though you may start receiving money back before final documents are completed.

"If you're having a tax return put in, if there's anything [HMRC] want to query they will keep that to one side but process on the rest of the claim," Mansi says.

Should my publisher be making the claim?

According to the BFI, the company making the VGTR claim should be either responsible for "designing, producing and testing," or "actively engaged in planning and decision-making during design, production and testing," or "directly negotiating, contracting and paying for rights, goods and services in relation to the video game."

This means the developer doesn't necessarily have to apply. The publisher can do it, but this absolutely has to be legally agreed between the two parties beforehand as they can't both claim. The same logic applies if you've asked another studio to do the mobile version of your game, for instance. Both parties need to decide who will make the claim.

"Since the games tax relief has come in, we've noticed there are publishers that can act as a game development company," Mansi says. "So one of the big things we will stress is: if you are doing some work for a publisher, make sure you have an agreement about which party is going to claim the tax relief. It should be part of the negotiations. It may not be dependent on who owns the IP either, but who is incurring the costs that will be set against the tax relief, which can be complicated in a publisher/developer relationship."

Can I claim for past projects and how far back can I claim?

If you're only just learning that VGTR exists, you'll be happy to know you can claim for past projects -- but there's a time limit. You need to submit your certification application within two years of the game's completion. Another possible situation is a game receiving an interim certificate but still being in development after three years. In this situation the BFI will re-send a certificate.

"We've had projects that are developed over years," Mani says. "When we issue the interim certificate, it's valid for three years. So we re-issue the interim certificate and we will always double check with the applicant if there are any changes in the [cultural test] points. As long as they're still meeting the qualifying points, that's absolutely fine."

Are there games that can't qualify for VGTR?

Not all games are eligible for VGTR. On top of qualifying as British (you can read about the cultural test on this page), it needs to be "intended for supply" -- that is to say, a game that the general public can purchase.

While this is generally understood, Mansi says the BFI team occasionally sees games that are being made specifically for educational purposes and are not available to the public. These would not qualify for VGTR.

"Or they're a game-like element to something," Mansi continues. "If it's something like a VR film, there isn't actually any interactivity, so that wouldn't actually be a game. In a games developer's mind, this might be more of a game because of the tech behind it, but VR films can get theatrical releases so this can qualify under the film tax relief.

"People are also using game tech to do other things now, whether it's in medicine or architecture. But it has to be available for someone to purchase."

Scott adds that gambling and advertising games are also excluded. Remember that dating game KFC released, I Love You Colonel Sanders? Well, it probably couldn't make a VGTR claim as it's clearly intended to advertise KFC. When we mention this example to Anna Mansi, she says it could "depend on who commissioned the project."

She explains: "It would depend on how promotional it is. We've had a couple of applications where it's been a fine line. It's not directly promoting a specific project, there is a company involved, but it is just a game on their website. We try and take a broad view, but every now and then we will say: no, that's the one where you are crossing the line, these are promotional purposes, you're just doing this game because you want someone to buy those trainers."

It's worth noting that the platform and format of your game doesn't impact your right to make a claim, whether you're working on a console shooter, a PC farming sim, a killer app for VR, or a mobile game that's going to take over Pokémon Go. Some material is also "explicitly not valid," Scott says, such as pornographic content or extreme violence, for obvious reasons.