Claiming Video Games Expenditure Credit (VGEC) can provide valuable tax relief for UK game studios. However, you must meet strict criteria and follow HMRC guidance closely.
This guide explains how to claim Video Games Expenditure Credit, what qualifies, and how to maximise your relief.
What is Video Games Expenditure Credit (VGEC)?
The Video Games Expenditure Credit (VGEC) has replaced Video Games Tax Relief ('VGTR') for many companies.
When claiming Video Games Expenditure Credit:
This structure mirrors the R&D Expenditure Credit (RDEC) regime and is designed to support UK creative industries.
Key eligibility requirements for VGEC
To successfully claim Video Games Expenditure Credit, your project must meet the following conditions:
Failing any of these conditions will result in HMRC rejecting your VGEC claim.
Switching from VGTR to VGEC
Many studios are transitioning from VGTR to VGEC. If you opt into VGEC before the completion period:
This is a key area where errors arise, particularly in mixed-regime projects.
How to calculate Video Games Expenditure Credit
The VGEC operates in a similar way to the Research and Development Tax Credit.. You calculate the relief as follows:
However, a key restriction applies. Your qualifying expenditure equals the lower of:
This cap prevents excessive claims and ensures fairness across the sector. HMRC have provided a worked example in their internal guidance.
Loss-making companies and payable credits
Even if your studio is not yet profitable, claiming Video Games Expenditure Credit can still generate value
Loss-making companies can:
This makes VGEC particularly valuable for early-stage and scaling game studios.
What counts as qualifying expenditure?
Understanding what are qualifying costs is vital. Furthermore, HMRC defines these as “core expenditure” within a separate production trade. Core expenditure includes the following:
However, some costs do not qualify:
These distinctions often determine whether a claim succeeds or fails.
Time limits for VGEC claims
You must submit your Video Games Expenditure Credit claim within strict deadlines.
A claim can be made, amended, or withdrawn up to the later of:
Missing these deadlines will result in lost relief.
How to submit a VGEC claim
To claim Video Games Expenditure Credit, you must file through your Corporation Tax return
The key requirements include:
Additionally, from April 2024, you must include an Additional Information Form (AIF):plus the CT600P supplementary page. These changes reflect HMRC’s increased scrutiny of creative industry tax claims.
Common VGEC mistakes to avoid
When claiming Video Games Expenditure Credit, common errors include:
Avoiding these issues will significantly reduce the risk of an HMRC enquiry.
Summary: Maximising your Video Games Expenditure Credit claim
Claiming Video Games Expenditure Credit can deliver substantial tax savings for UK game studios. However, success depends on accuracy, documentation, and a clear understanding of HMRC rules.
To maximise your VGEC claim:
Taking a proactive approach will strengthen your claim and protect your position in the event of an HMRC enquiry.
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