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HMRC internal manual

Video Games Development Company Manual

HM Revenue & Customs
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Overview and general definitions: meaning of ‘video game development activities’, ‘development expenditure’ and ‘core expenditure’

S1217AC, S1217AD Corporation Tax Act 2009

Video game development activities

For the purposes of the tax regime for Video Games Tax Relief (VGTR) ‘video game development activities’ refers to the activities in respect of which development expenditure is incurred.

Development expenditure

Development expenditure is expenditure on the video game development activities consisting of designing, producing and testing the video game. These activities relate solely to the development of the video game and do not include expenditure on marketing, distribution or other non-development activities.

Core expenditure

VGTR is only available on core expenditure.

Activities designing the initial concept of the game are not core-expenditure. Core expenditure consists of:

  • designing,
  • producing, and
  • testing the video game.

Stages of video game development

The key distinction to be made between qualifying core-expenditure and all development expenditure is the initial design of the concept for a video game. It is also important to distinguish between debugging a completed game and testing the video game prior to completion.

Initial concept design

Initial concept design is the stage of creation of a video game in which the project progresses from the initial concept to the point at which a decision can be taken whether or not it should proceed.


Design is the stage that typically occurs once the decision to proceed with the video game has been taken, but prior to production. It is also known as pre-production.


Production is the stage at which the game is developed. Designs and prototypes from the pre-production stage are developed to the point at which they conceivably may be ready for release, subject to testing.


This stage involves testing both technical elements and the entertainment value of the story, levels and gameplay. This stage clearly occurs after production, though it is possible that a game will return to the production stage in order to rectify issues. The development process will almost inevitably return to the testing stage after this backward step.

At the end of this stage, the game is considered to be ready for supply to the general public. The separation between testing and debugging is usually clearly signified by the release of the game.