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In a move that underscores the UK government’s commitment to nurturing its creative industries, new guidelines and incentives have been introduced for video game developers through the Video Games Expenditure Credit (VGEC). Effective January 1, 2024, the scheme is poised to bolster the cultural and economic fabric of Britain’s rapidly growing gaming sector.
The VGEC is part of the broader creative industry tax reliefs offered by HMRC and administered in partnership with the British Film Institute (BFI). It allows qualifying UK-based video game companies to claim a tax credit of up to 34% on eligible development costs, a shift from previous structures, now aimed at streamlining claims and encouraging investment in culturally British content.
What Qualifies?
To claim the VGEC, companies must demonstrate that:
- They are directly responsible for the game’s design, production, and testing.
- The game is intended for public release (not advertising, gambling, or internal use).
- At least 10% of core development costs are spent in the UK.
- The game is certified as “British” via the BFI’s cultural test or a qualifying co-production treaty.
This cultural test is pivotal. The BFI issues interim certificates for works in progress and final certificates upon project completion. Only productions passing this hurdle are eligible for the expenditure credit.
Calculating the Credit
Companies can claim:
- 34% of qualifying expenditure, calculated as the lower of:
- 80% of total core costs
- Total UK core costs
The credit is first applied to offset Corporation Tax, then any remaining amount can be:
- Used against other tax liabilities
- Surrendered to group companies
- Paid out directly as a cash credit
Companies have up to two years post-accounting period to submit or amend claims. Late submissions may be accepted at HMRC’s discretion but are not guaranteed.
Strategic Implications
This scheme relieves financial pressure on developers and reinforces the UK’s position as a global hub for cultural media. The VGEC aligns fiscal policy with broader soft power and digital economy objectives by targeting culturally British content.
As the global gaming industry continues to outpace film and music combined in revenue, policymakers are recognizing the value of national investment in interactive storytelling and digital artistry.
Final Considerations
To claim the VGEC, companies must also submit:
- A valid BFI certificate (interim or final)
- Detailed cost breakdowns (UK vs non-UK, and by category)
- Declarations of connected party transactions
For developers navigating uncertain financial landscapes, the VGEC offers not just a cash incentive, but a signal of long-term governmental support for a maturing creative sector.
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