Video games tax relief ― key provisions

By Tolley

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Video games tax relief ― key provisions
  • Overview
  • Eligible video games
  • Video games development company
  • Video game development activities
  • Eligible expenditure
  • The separate video game trade
  • Calculating the additional deduction
  • Losses
  • Restrictions on losses
  • Straddling periods
  • Provisional entitlement to relief
  • The cultural test
  • Anti-avoidance

This guidance note sets out the main provisions for video games tax relief (VGTR). These were introduced by Finance Act 2013 and are included in CTA 2009, Part 15B. Following an in-depth investigation by the European Commission to determine whether the development of video games in the UK requires support in the form of tax incentives, it concluded that the relief is compatible with EU State Aid rules in March 2014. The relief came into effect from 1 April 2014. The provisions for the cultural test in relation to video games relief are set out in the Cultural Test (Programmes and Video Games) Regulations 2014, SI 2014/1958, which came into force on 19 August 2014.

Details of the tax relief available for television programmes and animation can be found in the Television production and animation tax relief ― key provisions guidance note. The European Commission has provided state aid approval for these two reliefs. HMRC is accepting claims from 1 April 2013. The reliefs are very similar although there are some differences in terminology.


The VGTR is available for accounting periods commencing on or after 1 April 2014. The legislation sets out the provisions which deal with accounting periods straddling this date. Companies which carry out the development of video games may obtain an additional deduction for corporation tax purposes. The deduction is based on the company’s qualifying EEA core expenditure, up to a maximum of 80% of these costs. If the deduction results in a loss, a payable tax credit is available, which is equal to 25% of the losses surrendered.

A company which is entitled to an R&D expenditure credit (RDEC), or has claimed a super-deduction under the large company R&D regime, will not also be able to claim VGTR on the same expenditure. However, it is possible to claim VGTR on the amounts which do not qualify

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