D7.1253 Video games development companies—calculation of profits and losses
The activities of a video games development company in relation to a 'qualifying video game' are treated as a separate trade of that company. The activities are separate from any other activities of the company, including any activities relating to another qualifying video game1. Profits and losses are therefore calculated separately for each video game that the company produces.
The trade (referred to as the 'video game trade') begins on the earlier of the beginning of the design of the video game and the receipt of any income from the relevant game by the company2.
The rules apply a revenue treatment to income from, and expenditure on, a video game trade. This is the case even where the costs would normally be capitalised on the balance sheet. However, this only applies to income and expenditure which would otherwise be regarded as capital by reason only of being incurred on the creation of a video game3. Therefore expenditure on other capital assets is not treated as revenue, and is available for capital allowances in the normal way.
The profits and losses of a video games development company are calculated so as to be recognised income and expenditure in accordance with the