Ian Davie
Senior Consultant
If you’re involved in video game development in the UK, understanding the two tax relief schemes available is crucial for planning your project’s finances. The primary schemes are Video Game Tax Relief (VGTR) and the newer Video Games Expenditure Credit (VGEC). While both are designed to support the development of culturally British video games, they operate in different ways and come with distinct rules and benefits.
Rate of Relief: VGTR provides relief at a rate of 25%.
Subcontractor Expenditure: There is a restriction that limits the additional deduction in respect of core expenditure that comprises payments to subcontractors to £1 million.
Eligibility Criteria: At least 25% of core expenditure must be on goods or services provided within the UK or European Economic Area (EEA).
Non-Taxable: The relief is offered as an additional tax deduction, meaning it is not treated as taxable income.
VGTR Sunset Date: VGTR remains available for productions started before 1 April 2025, but the scheme will close on 31 March 2027.
Rate of Relief: VGEC offers a headline rate of 34%, but this relief is taxable income, resulting in an effective tax credit of 25.5%
Subcontractor Expenditure: The previous £1 million cap is removed, giving companies more flexibility.
UK Subcontractors Only: Unlike VGTR, VGEC does not allow EEA subcontractor costs, only UK-based ones are eligible.
Eligibility Criteria: At least 10% of core expenditure must be on goods and services used or consumed in the UK.
Taxable: VGEC is a taxable expenditure credit, much like the Research and Development Expenditure Credit (RDEC).
VGEC Implementation: VGEC is available for qualifying expenditure incurred on or after 1 January 2024.
Both VGTR and VGEC cover the same types of core expenditure, including costs related to design, production, and testing. They also share basic eligibility criteria: the game must be intended for public release and certified as culturally British by the British Film Institute (BFI).
Find out more about the certification and how to apply on the BFI website
Game development companies can choose which scheme to claim for each title, depending on when the expenditure is incurred and how the rules apply. Though the VGEC is marginally more beneficial, with a return rate of 25.5%, against VGTR’s 25%, this gain can be easily lost when EEA costs are excluded from the claim.
For many developers, VGTR remains the more practical option where EEA suppliers or partners are involved. As always, it’s important to review each project individually to determine which scheme offers the greatest benefit.
Understanding the rules around UK video game tax relief can be complicated. Whether you’re continuing with VGTR or starting a new claim under VGEC, TBAT Innovation can help you work out which scheme fits your project and guide you through the claim process. We can support you with meeting the eligibility requirements, organising your costs, and making sure everything is submitted correctly.
If you’re not sure which route to take or need help preparing your claim, get in touch with us for a free consultation!
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