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Indie Games Tax Breaks Guide
Indie Games Tax Breaks are a hot topic in the games industry. They are clearly a massive benefit to games developers but some think the big international developers are getting the breaks and indie developers are missing out.
We’ve discussed with some of our friends in the games industry and you can use our Indie Games Tax Breaks Guide to give your studio the best chance of making some significant tax deductions.
Indie Games Tax Breaks Guide
Speak to the professionals. Get advice from your local games industry body UKIE, speak to a specialist tax advisor and contact the UK Games Fund. Gaining an industry insight is essential to successful applications.
What costs are covered by tax breaks? For Video Games Tax Relief (VGTR), you need to consider the “core” spend, associated with the production of the game. These costs qualify for VGTR, which can create an additional tax deduction of up to 80 per cent of the spend. And if there are losses, this deduction can be surrendered for cash.
Get certified and make sure you qualify. In order to claim VGTR, BFI certification is required. This involves passing a cultural test, which is generally points based to evidence the game is “British”. You’ll have to make sure your game has cultural relevance. Any company producing a qualifying video game can potentially benefit from VGTR. Sole traders/partnerships cannot claim. If producing a game, consider applying for BFI certification as early as possible as there is a deadline for submission of the claim (and this is only valid with certification).
Consider which tax breaks are applicable. The most immediately relevant in terms of the Games sector would be VGTR and R&D. Other tax breaks that may be relevant would include EIS (tax relief on investment in certain companies), Entrepreneurs Relief (tax relief on disposal of a business) and patent box (can be claimed in addition to VGTR/R&D tax breaks; it is possible to patent software, which could lead to a 10 percent tax rate).
It’s not just big games developers that have qualified. Whereas it is true that big internationals have benefitted, it is also true that many smaller companies including start-ups – and have made a real difference. There are many household names benefitting from these and other tax breaks. The key is that these are tax reliefs made available by the Treasury – and companies are encouraged to claim, as long as they do so legitimately.
Advice when applying for tax breaks. For VGTR or R&D, don’t rule out any costs. Consider everything and then rule out if needed, rather than make an assumption. Also, consider whether salary or dividend is the best way to extract funds – at face value, dividends may appear more tax-efficient but these payments won’t qualify for VGTR or R&D tax breaks – but salaries might, meaning this could prove to be more attractive from a tax perspective.
Where and how might an organisation apply? Claims need to be made via the corporation tax return. For VGTR, as a minimum, you would need to attach certification from the BFI – but also ensure enough detail is provided for HMRC to understand the claim. For R&D claims, a report to support the claim is usually recommended.
Want to know More?
For more information on tax breaks in the UK visit UKIE and contact the UK Games Fund. You can read a full interview with tax director Matt Appleton here
Thanks for reading our Indie Games Tax Breaks Guid, for more interesting articles on the indie games industry, check out the links below.
INDIE DEV INTERVIEW: PETER TALKS REMORSE: THE LIST
EVAN’S REMAINS WALKTHROUGH – PART 1
SKY: CHILDREN OF THE LIGHT – REVIEW