HMRC releases eligibility test for Video Game Tax Relief
R&D is a well known relief, we’ve written about it before. In summary, it enables certain UK companies to claim some of their expenditure back either as cash or as a reduction in corporation tax.
Now we have the Video Game Tax Credit scheme, which can offer further tax relief to game developers whose core expenditure is mostly within the UK or EAA. The British video game market is thriving, and this new scheme is a welcome additional tax relief for the creative industries.
We now know how we can claim this. Last week (August 19th 2014), HMRC introduced a new test to asses who can qualify for the Video Game Tax Credit scheme. The ‘Cultural-Test’ is a series of questions designed to see if a particular video game reaches the specified criteria to be eligible for this relief.
What this means
If your game qualifies for the credit, you can claim an additional tax deduction of up to 80% on the core expenditure of producing the game. If the additional tax deduction results in a loss, then you may be due a tax refund of 25% of the qualifying expenditure. Please note that you cannot claim R&D relief and video game relief on the same spend, but can be claimed on the same project.
What you need to know
The Video Game Tax Credit came into effect on 1st April 2014 and can be applied to 3 types of expenditure incurred on or after that date:
- Principal Photography
It can be claimed for video games produced in the UK/EU with sufficient qualifying content, where the majority of the core expenditure has been made within the EEA.
The Culture Test
As of August 19th 2014, HMRC has issued the ‘Culture Test’ to assess whether a specific game qualifies for the tax relief. This is done by considering the following criteria:
- What country is the game set in?
- What is the nationality of the characters?
- Does the game depict a UK or EU story?
- How much English Dialogue is there?
- The location of the work done on conceptual development, design, programming and audio production
- Nationality and residence of key individuals involved in the production of the game
The test is conducted on a points basis, with successful games needing a minimum of 16 out of 31 to qualify.
To find out more about tax relief schemes that your company could be eligible for, drop us an email at firstname.lastname@example.org