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HMRC internal manual

Video Games Development Company Manual

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HM Revenue & Customs
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Taxation: profit/loss calculation - income - nature

S1217BB Corporation Tax Act 2009 (CTA 2009)

Where profits or losses of a video game trade of a Video Games Development Company (VGDC) (VGDC20010) are within the rules in Part 15B CTA 2009, the income to be brought into account is all the receipts of the trade of making, or making and exploiting, the video game.

This means all the money received from generating income from the video game in the widest sense, including, but not limited to:

  • receipts from the sale of the video game, or rights in the video game,
  • royalties or other payments for the rights to use the video game or aspects of it (for example, characters or music),
  • payments for rights to produce games or other merchandise, and
  • receipts by way of a profit share agreement.

Video Game Tax Credits (VGTCs) due or paid to the VGDC in connection with a video game are not regarded as ‘income from the relevant video game’.

Loans and grants

Receipts such as grants may be income where they are unconditional contributions to the costs of the video game. Loans are not trade receipts and, as with any other trade, they are not counted as video game income. It may not be obvious whether a receipt is a loan or not.

Video game financing may involve bringing in money from a wide range of sources, and promising investors/contributors a contingent return on their money. Sometimes it may be difficult to decide the character of a receipt or loan. Some funders may impose standard terms but each receipt will have to be viewed on its own conditions.