Firstly, I should start this post by stating that we at Eaton Smith LLP do not give tax advice, nor can we assist you in making a tax relief claim. The below has been prepared with content from RSM, accountants who can assist you with tax relief claims. Please contact me if you would like me to make an introduction.

Chancellor Jeremy Hunt delivered the Government’s Autumn Statement yesterday, but what does this mean for the current Video Game Tax Relief regime?

Well…Video Games Expenditure Credit (‘VGEC’) now looks set to become the successor of the existing Video Games Tax Relief (‘VGTR’) regime.

However, there were a small number of amendments to the original plans for VGEC that were announced on 22 November, including:

• Greater levels of funding have been announced for the BFI Certification Unit. This should be welcomed by many in the industry, as it should theoretically shorten the current 18-20 week turnaround times (as reported by BFI themselves) for cultural certificates.
• Companies will be required to disclose “connected-party transactions” and charge companies at an “arm’s length” rate. The original position was seemingly to exclude “connected-party profits” from any tax relief claim entirely, so this particular amendment will likely be welcomed by many in the industry with current group arrangements in place.

Additionally, the following key points should be noted ahead of the introduction of VGEC:

• VGEC should be available on expenditure incurred from 1 January 2024. All new games commencing from 1 April 2025 must claim under the VGEC regime. On 1 April 2027 VGTR will cease and all games must claim under the VGEC regime.
• The net benefit to video game studios should increase slightly following the introduction of VGTR, but not to the extent that the headline rate of 34% might suggest. TIGA has recommended that the headline rate is increased from 34% to 39%, stating that such a decisive increase would facilitate growth in the video game sector.
• All qualifying costs for video games will now need to be “used-and-consumed” within the UK. This previously applied to European Economic Area (EEA) expenditure.
• There will be no subcontractor limit. Under the existing regime, studios claiming relief are limited to £1m of qualifying subcontracted costs for any one game. For larger budget games, this should be beneficial.
• Supplementary information forms will now be required to be submitted to HMRC before a tax return is submitted.

VGTR is of course an important asset for video game studios. Accordingly, it’s paramount that studios understand the changes that VGEC will have on the current regime.

This is not legal or tax advice; it is intended to provide information of general interest about current legal and tax issues. You should seek specific legal and tax advice before acting in reliance on any of the information provided.