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HMRC internal manual

Video Games Development Company Manual

HM Revenue & Customs
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Taxation: separate trade - video game developments

S1217AA Corporation Tax Act 2009

The video game tax regime is targeted at Video Games Development Companies (VGDCs) (VGDC10110) that are engaged in making video games (VGDC10100).

Video games are usually sold directly by the VGDC to the public. This may be done in a number of ways, either stored on a physical media or via the internet. The VGDC usually retains the rights to the video game, though they may sell the rights at a future time. This is common with ‘classic games’.

Video games are typically developed as stand-alone products. However, it is now common to produce enhancements in the form of additional levels and features which are added to the core programme. This is particularly common practice for games played over the internet or those that are downloaded as ‘apps’.

Depending on the facts, the enhancements may be considered to be part of the original video game trade or a new video game trade in its own right. This will normally depend on whether there are any improvements made to the underlying game engine.

So where additional levels are created and released as an ‘expansion pack’, but do not fundamentally change the underlying game code or functionality, these will be typically seen as part of the original game. Future costs are therefore part of the same trade. This is simply an increase in content made available through the game.

However, it is conceivable that such development goes into an expansion pack that it could be regarded as a new game. Also, a sequel may involve such limited development that it merely represents a continuation of the same trade.

This will be considered on the basis of the facts of each case.