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HMRC internal manual

Video Games Development Company Manual

HM Revenue & Customs
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Eligible expenditure: attributing costs across the stages of video game

The rules for Video Games Development Companies (VGDC) include the rules for video game tax relief. The stages of development described are those that are typical for generic video game development. For video games, it is anticipated that attributing costs to a specific stage may prove difficult.

Video game developments do not always take place in a strict sequential manner. There is no standard format for development. Items of expenditure may therefore be attributable in varying degrees to several stages.

For example:

  • a game designer and level designers might be engaged as part of development, from initial concept through to testing. They will typically have less involvement after the design stage but they will often be required to provide input throughout production and sometimes in testing;
  • programmers, artists and sound technicians will be responsible for the production of the video game itself. They will often be involved in testing and be required to correct issues that arise from that process. They might be consulted in the design stage to consider what is feasible in respect of gameplay, artwork or audio effects.

It would be reasonable to consider that all these examples contribute to more than one stage of video game development.

It is firstly important to identify which stage of development a given item of expenditure contributes to. It is then necessary to determine how much expenditure is attributable to that stage.

This two-step process is most important when determining what is design that is core development and what is designing the initial concept for a game. Initial concept design is not core expenditure so does not qualify for VGTR.

It is therefore most important to identify costs that are initial concept design and then quantify them.

The attribution of costs between stages of development must be done on a just and reasonable basis (VGDC50110)