Video Games Tax Relief (VGTR) is available to Video Games Development Companies (VGDCs) conducting a video game trade. There can only be one Video Games Development Company for each relevant video game.
The VGDC is the company that actually produces the video game. To be regarded as a Video Games Development Company the company must:
A VGDC does not need to have direct responsibility for every aspect of all of these activities. Third parties are not prohibited from undertaking some of these activities on behalf of the company.
It is common industry practice to subcontract third parties to deliver certain elements of a video game. This may be activities such as artwork or sound. Alternatively, it might be for specific parts of a game, such as a particular module requiring a different game engine. Where this is the case, the company is not prevented from being the Video Games Development Company for tax purposes.
The company must still retain overall responsibility for these activities and have active involvement. A company cannot simply commission the entire video game and hold the creative copyright for the video game.
Subcontractors will not qualify as a VGDC as they are only delivering an element of a development.
If no company meets these requirements for a qualifying video game, then there is no Video Games Development Company. Therefore, no Video Games Tax Relief may be claimed for the development.
A VGDC might also have additional responsibilities. This might include the development, marketing and distribution of the video game. There is no requirement that it must do so to be eligible for the relief.
There can be no more than one Video Games Development Company for any video game.
In some cases it is possible that more than one company will meet the requirements for qualifying as a VGDC. In such circumstances, the company which is most directly engaged in the activities described above will be treated as the VGDC.
The phrase ‘most directly engaged’ is not defined in the legislation. This can only be decided on the facts of each case.
If there is no company which meets the requirement of this definition, then there will be no VGDC in relation to that video game.