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HMRC internal manual

Video Games Development Company Manual

Calculation: surrenderable losses and Video Games Tax Credit - examples - single-period developments

The following examples illustrate how Video Games Development Companies (VGDCs) that sustain a surrenderable loss can surrender that loss in return for a payable tax credit (VGDC55100). In each case the development is completed within a single period.

Example 1

A VGDC makes a video game with total core expenditure of £1m, all of which is EEA expenditure. The video game was commissioned by a publisher which pays £900k for it.

Income   £900k
Expenditure   £1m
Pre-VGTR profit (loss)   (£100k)
Enhanceable expenditure £800k  
(EEA core expenditure of £1m x 80%)    
Additional deduction   (£800k)
Post-VGTR profit (loss)   (£900k)


The surrenderable loss is the lesser of:


  • the trading loss: £900k and
  • the enhanceable expenditure on which the additional deduction for period: £800k.

In this case, the VGDC can surrender up to £800k.

The amount of credit due is:

    the payable credit rate: 25%

    multiplied by

    the loss surrendered: £800k

giving a payable credit of £200k. This is equal to 20% of the total core expenditure. The VGDC is not obliged to surrender the entire loss, but it will most likely do so.