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HMRC internal manual

Video Games Development Company Manual

Taxation: separate trade - pre-trading expenditure

Where a company is a Video Games Development Company (VGDC) (VGDC10110) for the purposes of Part 15B CTA 2009, the development of each video game (VGDC10100) is treated as a separate trade. This isolates the development of each video game on an individual basis for the purpose of calculating profits and losses.

For a video game that enters design, there will often be expenditure that has been incurred prior to the commencement of the video game’s separate trade - see VGDC20100.

Where a company is set up especially to produce the video game, the preliminary work will be bought by the VGDC or its value will be transferred in after the trade has commenced.

Where the preliminary work is instead done by the VGDC prior to the commencement of the trade, this pre-trading expenditure is not transferred to the trade. There are no specific provisions in the rules for VGDCs regarding pre-trading expenditure.

This means that any trading expenditure already brought into account cannot be reclassified as being expenditure of the trade subsequently.