This document provides information about the UK Video Games Tax Credit program. It outlines the qualifications needed to receive the tax credit, including passing a cultural points test and having at least 25% expenditure in the European Economic Area. It describes the cultural points test in detail, including the four parts and point values. It then discusses considerations for video game development companies, eligible expenditures, obtaining funds from the program, and other important points about the 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