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HMRC internal manual

Video Games Development Company Manual

Taxation: separate trade - introduction

Part 15B Ch 2 S1217B-S1217BE Corporation Tax Act 2009 (CTA 2009)

Where a company is a Video Games Development Company (VGDC) (with a qualifying video game to which the conditions for VGTR are met) (VGDC10110) for the purposes of Part 15B CTA 2009, the development of each video game is treated as a separate trade.

A video game includes the core programme and any additional software produced within an individual contract for that video game. There can be a number of different parts of a game which are supplied separately and these are treated as a single video game (VGDC10100). See VGDC20130 for further details.

For each video game, the profits and losses must be calculated separately. Also, the rules applying to a trade should be applied to each video game.

In producing their statutory accounts, VGDCs can account for their costs and income in a number of ways. This will vary according to their operating model and how they think best represents a true and fair view of the business.

The rules for Video Games Tax Relief (VGTR) therefore set out a consistent approach to calculating taxable profits of VGDCs which applies regardless of whether or not VGTR is claimed in respect of a video game. This approach is important when considering relief for losses.

There are special provisions which restrict the ways in which losses arising from a video game development trade can be used and this will vary depending on whether or not the video game has been completed and the trade has ceased (VGDC20110).

The Part 15B CTA 2009 basis applies a revenue treatment to income and to certain types of expenditure that would otherwise be treated as capital expenditure (VGDC20200).