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HMRC internal manual

Video Games Development Company Manual

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HM Revenue & Customs
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Calculation: maximum amount of core expenditure subject to claim

S1217CF, S 1217CG Corporation Tax Act 2009

The amount of Video Games Tax Relief (VGTR) is based on the European Economic Area (EEA) core expenditure of a video game trade. The Video Games Development Company (VGDC) will receive an additional deduction of up to 80% of the total core expenditure incurred.

A VGDC can claim VGTR on the lower of:

  • 80% of total core expenditure, and
  • the actual EEA core expenditure incurred.

EEA core expenditure is the amount of core expenditure (VGDC50010) incurred by the VGDC which is also EEA expenditure (VGDC50050).

In this guidance the amount on which the VGDC is entitled to claim VGTR is termed enhanceable expenditure.

Example 1: core expenditure all EEA

A VGDC incurs £200k of core expenditure on a video game, all of it in the EEA.

Actual EEA core expenditure > 80% of total core expenditure.

The VGDC can claim VGTR on 80% x total core expenditure. Enhanceable expenditure is £160k.

Example 2: core expenditure part EEA, part non-EEA

A VGDC incurs £400k of core expenditure on a video game, of which £250k is EEA expenditure. The remainder is incurred in Canada.

Actual EEA core expenditure < 80% of total core expenditure.

The VGDC can claim VGTR on actual EEA core expenditure. Enhanceable expenditure is £250k.

Example 3: co-development

An EEA company incurs £500k of core expenditure on a video game. Its co- developer incurs a further £50,000 of core expenditure on the video game.

Actual EEA core expenditure > 80% of total core expenditure.

The VGDC can claim VGTR on 80% x total core expenditure incurred by the VGDC. Enhanceable expenditure is £400k.

Even though combined core expenditure on the video game (by both co-developers) was £550k, the limit is 80% of the total core expenditure incurred by the VGDC.