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HMRC internal manual

Corporate Finance Manual

From:
HM Revenue & Customs
Published:
16 April 2016
Updated:
27 August 2026 - See all updates

CFM95760 - Interest restriction: tax-EBITDA: Video Games Tax Relief

TIOPA10/S407(3)(g)

Companies which are directly involved in the design and development of a video game are entitled to claim video game tax relief subject to certain conditions. Deductions for Video Games Tax Relief under CTA09/S1217CF and Video Game Tax credits claimed under CTA09/S1217CH are excluded from the calculation of adjusted corporation tax earnings when determining a company's tax-EBITDA.

Qualifying companies can claim:

  • an additional tax deduction of 100% of qualifying expenditure incurred on the design, production and testing of the video game;
  • or if the company makes a loss, a repayable tax credit of 25% of the loss up to the amount of qualifying expenditure.

Further guidance on Video Game Tax Relief can be found at VGDC10000 onwards.

Effect for tax-EBITDA purposes

Video Games Tax Relief is one of the qualifying tax reliefs specified as an excluded amount in TIOPA10/S407(3).

Any additional deductions received over and above the actual amount of qualifying expenditure incurred would have a distorting effect of reducing the earned profit of the company for tax-EBITDA purposes, decreasing the group's interest capacity.

Conversely, the receipt of a tax credit of 25% of a surrendered loss would have the effect of increasing a group's interest allowance if included as an income item for tax-EBITDA purposes. This would serve to increase the benefit received for companies claiming Video Games Tax Relief beyond the intention of the original relief.

Consequently, additional deductions and tax credits received under s1217CF and s1217CH respectively should not be brought into account when calculating taxable total profits of the period to determine a company's tax-EBITDA.

Finance Act 2024 changes to creatives reliefs

FA 2024 introduced changes to creative reliefs:

  • It phases out Video Games Tax Relief under CTA09/S1217CF and Video Games Tax Credits under CTA09/S1217CH, with these ceasing  for accounting periods beginning on or after 1 April 2027.
  • It replaces these with the Video Games Expenditure Credit (VGEC), which can be claimed on expenditure incurred from 1 January 2024.

For further guidance see the Creative Industries Expenditure Credits manual, in particular CREC027000 for details of which video games qualify for VGEC, and CREC09000 for commencement and transitional rules.

The CIR rules do not reference the new expenditure credits and, therefore, they do not exclude VGEC from the calculation of tax-EBITDA. As a result, when calculating tax-EBITDA, any expenditure credits received should be included.