It sounds simple, but VGTR is still hugely under appreciated. In 2019, only 243 games obtained a BFI certificate and therefore claimed VGTR relief. There are over 2,200 studios in the UK, many making more than one game, so you can see how many people aren’t making the most of VGTR.
The UK government has set up an excellent scheme, whereby for every £100 spent, you get £20 back in tax relief from the HMRC. There are some hoops to jump through and a bit of admin along the way, but it’s well worth doing.
The lengthy process of applying for the refund from the HMRC may be a deterrent so we wanted to lay it out below to help anyone who is looking in to it.
Step 1: What can be claimed and how
To be eligible for VGTR, your studio must be responsible for the majority of the planning, designing, developing, testing and producing of a game. At least 25% of your eligible costs must be incurred in the European Economic Area.
In essence, VGTR only applies to a maximum of 80% of the game’s core expenditure in the EEA. The relief is 25% of that 80% of a company’s core expenditure (i.e. 20% of a company’s development costs).
Most importantly, you do not have to wait until the game is completed before making a claim for VGTR; you can make interim claims for VGTR during development of the game. Great if you’re trying to balance your cash flow.
Step 2: the BFI certificate
The British Film Institute (BFI) is responsible for assessing applications for British video game certification. You need to make an online application for each game that you would like certifying as a British video game.
Before starting, ask yourself this: 1) is the video game British? 2) is the game intended for supply? 3) Did at least 25% of the development costs come from within the EEA?
In order to be certified as as British video game the BFI must be satisfied that the video game passes the relevant cultural test. The cultural test is based on a score of 31, and you need 16 points to pass. The test looks at the cultural content of the game, its cultural contribution, its cultural hubs, and its cultural practitioners.
A copy of the final video game will be reviewed by BFI before issuing a final certificate.
Step 3 – The Numbers!
Your accountant, alongside your full year tax return, must prepare your VGTR refund calculations. These numbers have to be included in the CT600 which is submitted to the HMRC
Your accountant will need all of your costs, forecasts, and development spend. Make sure you keep any freelance work done on the game fully documented. They should have been preparing management accounts for you throughout the year anyway – but make sure you’re tracking the numbers monthly.
Step 4 – The Waiting Game!
Once your year end has passed, it will likely take another 4-6 weeks before your accounts are ready for submission to the HMRC. It then takes the HMRC between 4-8 weeks to process your claim and send you the money (if there’s a refund due).
This all means, that from the second your financial year end is finished, it might take 8-14 weeks until you get the VGTR money back. It’s well worth the wait, but just know it takes time.
If you want early access to your VGTR refund, then that’s where Sugar can help. We review your finances, and VGTR process, and once we’re comfortable we will forward finance the refund for you. This means you don’t have to wait for all the steps above, we can give you the money now.
If you want to learn more, please get in touch here or drop us a line at email@example.com