02 Dec 2021

4 Reasons Why Businesses Should Claim Video Games Tax Relief (VGTR)

Sam Stephens
Director

Why should business be claiming VGTR?

The UK’s games development sector has skyrocketed over the last few years, generating more than £2 billion for the British economy, according to the trade association, TIGA. Although many businesses have struggled throughout the last couple of years due to the pandemic, the video games industry has done the opposite, with a record-breaking growth in the number of developers employed, the annual investment by studios and the number of businesses involved in games production.

What is Video Games Tax Relief And why is it important?

Tax reliefs such as Video Games Tax Relief, or VGTR, are so important now more than ever. Although so many companies have skyrocketed, there are a significant number of smaller developers who have struggled trying to keep up and compete with larger ones. This is where VGTR is a brilliant source of funding, as it provides tax relief to thousands of UK game developers.

Upon a successful claim, businesses can have up to 25% of their core development expenditure reimbursed by the UK government. In the last tax year alone, over £100 million was paid out under the scheme, to Britain’s Video Games Development Companies (VGDCs). This equates to approximately £345,000 per claim!

With all of this in mind, there are so many reasons why claiming VGTR is important for your business

VGTR helps your company stay competitive in the industry

It is a pretty well-known fact that game development is an extremely competitive field, and the series of lockdowns due to Covid-19 has only made the competition harder. It’s also worth noting that due to Steam and other virtual game stores, you are not just up against UK developers, but developers around the globe. Some countries also have the capabilities to build games much cheaper than here in the UK.

All of this combined just brushes the surface when it comes to the obstacles game developers face in the field. This is where VGTR can help your company thrive in this cut-throat industry. This scheme levels the playing field by significantly reducing the cost of game development. This enables creators to charge a lot less for premium features, titles, and add-ons, whilst also making a profit.

VGTR enables businesses to invest more in their game development and increase the quality and variety of their titles. Developers also have the option to allocate funding they would have used for the development, and instead put it towards better marketing for their games.

 Video Games Tax Relief enables businesses to earn cash quickly

Another brilliant perk of claiming for VGTR, is the quick pay out you receive. As long as there is nothing wrong with your VGTR claim, you should receive the funding within four to ten weeks of applying. Although this scheme isn’t quite as fast as securing a loan, it is money you do not have to pay back, and it is significantly quicker than trying to get equity investment.

It’s worth noting that the wait time depends on other factors too, including the amount of submissions coming into the HMRC and whether your claim has any incorrect information. In order to ensure your claim is watertight, it could be a good idea to hire an experienced tax consultant, as they will be able to help ensure you submit a full proof, maximised claim.

VGTR helps developers have full control of their business

One of the benefits of VGTR that people might not know about, is that it ensures studio owners can protect their equity. Unlike other investments like VC and angel investment, all of the VGTR tax relief and cash credits are non-dilutive, meaning that you will not be required to surrender any shares in your studio.

Although outside investment can be extremely important, maintaining equity ensures that you keep the voting rights and command a higher share of your profits. Essentially, you are in more control over your company and your studio’s direction. And in most cases, investors tend to be more interested in investing in companies that have other streamlines of funding which gives them security.

VGTR enables companies to bring development “Onshore”

The final benefit of claiming VGTR, are the perks it gives when you bring your development back to Britain, i.e., “onshore”.  Although some companies might opt to develop their games “offshore”, there are actually a lot of advantages of onshore development.

To start with, collaboration is a lot easier. Companies can meet with developers in person, rather than over the phone or via video call. This tends to make the work move much faster and be more connected to your studio and your goals. Not to mention that face-to-face meetings are significantly better at the start of the process, when you are brainstorming new ideas and developing concepts.

For the most part, onshore development tends to bring better communication between teams, fewer misunderstandings, better comprehension of the project and will likely reduce the number of iterations in your development process. This then leads to faster progression, lower production expenses and games that are significantly better developed.

How can TBAT help your business?

With over 19 years of experience, TBAT Innovation has worked with technology and research and development organisations all over the UK. TBAT is a value-led independent consultancy, with a goal of helping businesses progress their projects from beginning to end.

Our specialists can assist UK businesses who are looking to secure grant funding and tax incentives to help drive innovation and can support you through every step of the claims process. Want to learn more? Get in touch with our team today through our contact form or book a meeting through our online platform here.

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