UK video games tax credit

1. Moses Nyachae
Saffery Champness
Email: moses.nyachae@saffery.com
Tel: 020 7841 4135
UK Video Games Tax Credit

2. How do you qualify?
• Made by a Video Games Development Company (VGDC)
• Must be intended for supply to the general public
• Pass the cultural points test
• Achieve at least 25% EEA expenditure

3. Cultural Test
• 31 point test; pass mark is 16 points
• Broken down in to 4 sections
• Part A- Cultural Content….where is the story set; where
are the characters from; who wrote the script/underlying
material, what language – 16 points available
• Part B - Cultural Contribution…..second chance saloon in
case you’re struggling for points in Part A – 4 points
available
• Part C – Cultural hubs …..locations where the work is
carried out – 3 points available
• Part D – Cultural Practitioners….nationality of the
personnel engaged on the show – 8 points available

4. Cultural test – cont’d
• Part A made up of 4 subsections
• A1- Game setting……4 points if set in Europe; 3 points if
set in undetermined location
• A2- nationality of the characters….4 points if the
nationality/residency of the lead characters is European
or can not be determined
• A3 – story based on European subject matter/ underlying
material….4 points
• A4 – dialogue in the English language…. 4 points

5. The Video Games Development Company
(VGDC)
• Must fall within UK tax jurisdiction
• Must be responsible for designing, producing and testing
the video game
• Must be actively engaged in planning and decision-making
during the above process
• Directly negotiates, contracts and pays for rights, goods
and services in relation to the video game
• Can subcontract work subject to cap of £1m per game

6. Total Cost of Developing the Game
Deductions
• Initial concept design costs**
• Debugging and maintenance costs
for a completed video game
• Financing costs
• Marketing/Promotion costs
Core Expenditure
Is EEA spend > 25% of core expenditure?
No
End
Yes
Is EEA Spend > 80% of core expenditure?
YesNo
Tax Credit = 25% EEA spend Tax Credit = 20% of core expenditure

7. 80%
20%
100% EEA Budget
Attracts tax credit Does not attract tax credit
• 25% tax credit available only on the first 80%

8. HOW DO YOU OBTAIN THE MONEY?
• Need 3 things
– BFI certificate (interim/final)
– Statutory accounts
– Tax return
• Can make interim claims during development
• BFI turnaround time expected to be approximately 21 days
• HMRC turnaround time expected to be approximately 28 days

9. SEPARATE SPV’S VS. SINGLE VIDEO GAMES
COMPANY
When deciding which of the above 2 options works best for
you, factors to consider include the following:-
• Cashflow and timing requirements
• Financier ring fencing requirements
• Accounting, reporting and auditing costs
• Dealing with HMRC
• Potential residual losses available for group relief

10. OTHER IMPORTANT POINTS
• Relates to expenditure incurred on or after 1 April 2014
• Video games produced for advertising , promotional or
gambling purposes do not qualify for the tax credit
• Video games tax relief not available on expenditure where
R&D expenditure credit has been claimed
• Deferred costs are not eligible for the tax credit until they
are paid
• Artificially inflated claims may result in severe penalties
imposed by HMRC.

11. Conclusion
• Compatible with other national incentives
• No cap on funds available
• Nationality of personnel irrelevant provided the
production qualifies as British under the Cultural test
• Quick turnaround expected
• Paid direct from UK Government, no middlemen.
• Will be bankable and certain