Tax Man helps Pac-Man

It is often said that today’s children spend too long playing computer games. However, during my teenage years in the ‘80s I also spent considerable time playing such games.

Memories flood back of ZX Spectrums, Amstrads, Commodore Vic 20s and Commodore 64s. Unfortunately my first machine was an Oric 1, not a very popular choice by the games developers!

Despite the advent of home computers, I often reverted back to the Atari games console, and here is my claim to fame. I achieved the highest scores at that time on Chopper Command and Pitfall, two Atari games developed by Activision, a company that still develops games today.

These days my time is spent offering tax planning advice to companies, and my gaming restricted to being useless on Flappy Birds or watching my Wii gather dust!

So what has this to do with tax?

Well, the UK is now offering a tax incentive to the computer games industry.

Video Games Tax Relief (VGTR) applies from 1 April 2014 and is an enhanced corporation tax relief available to qualifying companies. Companies that already claim R&D tax relief cannot claim both, so it will be a case of claiming the most beneficial where both are suitable.

The enhancement is an extra 80% relief for qualifying costs.

VGTR is available where the Department of Culture, Media and Sport has certified the production as culturally British and the relevant certificate is provided to HMRC along with the corporation tax return for the period in which relief is being claimed.

A qualifying video game is one which does not include anything which is produced for advertising or promotional purposes, or anything produced for the purposes of gambling.

Several conditions must be satisfied by the company carrying out the development. A qualifying video games development company is one which:

  • has responsibility for design, production and testing the game
  • is actively engaged in planning and decision making during the stages referred to above
  • directly negotiates, contracts and pays for rights, goods and services in relation to the video game.

Of course this is only an overview of a very new relief but it is terrific that the UK’s gaming industry is receiving this support from HMRC. I only hope that I am allowed to play on the games that I am asked to make claims for, for research purposes of course!

Nigel Holmes, Partner

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