Booming Gaming Industry in Leamington Spa

Leamington Spa is often referred to as ‘Silicon Spa’ due to its thriving technology and digital sector, particularly in video game development. The nickname draws a parallel between Leamington Spa and Silicon Valley in California, which is renowned as a global hub for technology innovation.

What are the new tax reliefs for Video Games?

Tax incentives for film, TV, and video games underwent a transformation into expenditure credits, mirroring the structure of the Research and Development Expenditure Credit (RDEC). Starting from 1 January 2024, the Audio-Visual Expenditure Credit (AVEC) replaced existing tax reliefs for film, high-end TV, animation, and children’s TV, and the Video Games Tax Relief (VGTR) was replaced by the Video Games Expenditure Credit (VGEC).

Are you eligible for VEGC, and how is it applied?

Under the new VGEC scheme, companies will only receive credits for expenditures ‘used and consumed within the UK’, eliminating the previous subcontracting cap in place for VGTR. This restructured scheme offers taxable above-the-line tax credits based on qualifying expenditures.

Films, high-end TV productions, and video games will all qualify for a credit rate of 34% under VGEC. However, it’s important to note that the calculation of expenditure credits applies the current corporation tax rate of 25%. Companies will receive the credits before taxes are calculated, but they will need to include the credit amount as taxable income.

There is also an 80% cap on the amount of VGEC companies can claim for their UK Core expenditure, which refers to the funds designated for the development of video games within the UK.

Starting from 1 April 2025, new productions must be claimed under the VGEC scheme. However, companies presently benefiting from VGTR can continue to do so until 1 April 2027. Following this date, all companies will be required to claim under the VGEC scheme.

Are you eligible for AVEC, and how is it applied?

Similar to the VGEC, qualifying expenditure under AVEC adheres to the definition used in current film and TV reliefs – expenditure that is ‘used or consumed in the UK.’

As with VGEC, AVEC offers taxable above-the-line tax credits on qualifying expenditures. Animation and children’s TV productions will be eligible for a rate of 39% after the main rate of corporation tax has been deducted from profits made.

Additionally, AVEC introduces new criteria for high-end TV programmes. These include a minimum slot length of 20 minutes, applicable on an episode-by-episode basis, and a definition for documentary programmes.

What changes occurred following the Spring Budget?

In the Spring Budget, it was announced that films meeting the qualifying criteria for an ‘independent film’ would be eligible for an Independent Film Tax Credit (IFTC) of 53%.

The higher rate is applicable to expenditures incurred from 1 April 2025 for films commencing principal photography on or after 1 April 2024. Claims can be submitted starting from 1 April 2025.

To qualify for the IFTC, a film must pass a new test administered by the British Film Institute. This test is anticipated to necessitate either key talent, such as the director or writer, being from the UK, or the film being an international co-production.

How we can help you

If you would like to find out more about how your business could benefit from these new tax credits, please get in touch with our in-house R&D specialist, Neil Allcroft. Neil can support and guide you through the intricacies of mitigating your tax liability, especially in the gaming industry.  

Email: [email protected]

Phone: 01926 422292