VGTR & R&D Tax Credits

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R&D Tax Credits & Video Games Tax Relief

which one to claim and how?

R&D Tax Relief and/or VGTR?

The R&D Tax Relief scheme has been in existence since 2000 but with the introduction of the Video Games Tax Relief the way that many games companies claim the R&D Tax Incentives has been impacted

This is an area of complexity and for many game companies claiming will be very time consuming especially for studios that do not use Special Purpose Vehicles (a company registered specifically for the costs associated with a single game)

This means that separating out the costs associated with each game will require forensic examination of all the company’s financial information

Which is more beneficial?

Since R&D Tax Relief and Credits can be more generous than VGTR, companies will lose out if they do not consider which scheme(s) will be most suitable for their particular circumstance.

As a general rule of thumb, it is usually of greater benefit to the video game developer to claim under the R&D Tax Incentives, instead of the VGTR, if the studio is doing work that is eligible under the R&D Tax Relief scheme.

How do I go about claiming?

All activities and costs should be carefully reviewed for eligibility to obtain the maximum benefit for the company. This approach can result in claims under both schemes, but involves careful and forensic examination of both technology and costs.

Because this is an area of great complexity, MMP can provide independent advice to determine which schemes are the best to claim under

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R&D Tax Relief: The basics

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R&D Tax Relief

Eligible R&D is sometimes difficult to identify because it can have a very broad definition, it can also be found in unexpected areas. Broadly, to qualify as eligible R&D the project must be:

  • seeking to achieve an advance in science or technology;
  • subject to scientific or technological uncertainty;
  • conducted in a systematic and thorough fashion.

If these three aspects are present in a project then parts of the project are likely to qualify for the R&D Tax Incentives. Complex system uncertainty, indirect R&D activity, project planning, abortive projects, prototypes or pilot plants, design, or seeking to achieve cosmetic and aesthetic effects are all examples of projects or activities which are commonly misconstrued as being ineligible. These areas may be in fact be eligible provided they encompass the three requirements listed above.

Software developments in particular require some expertise to determine the eligibility for R&D tax Relief. There is additional guidance for software projects within the Corporate Intangibles Research and Development (CIRD) manual but practical application and experience is important when determining eligibility.

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More about technology tax incentives

Technology tax incentives can be complex and if your studio is looking to claim R&D Tax Relief or Tax Credits in addition to Video Games Tax Relief, then why not speak to MMP? We will reduce your internal workload in making the claims and provide an expert resource to ensure you claim what you are entitled to under the various schemes.

For more details about all the technology tax incentives available to UK businesses, head over to our corporate site.

Need assistance determining if you can claim both VGTR & R&D Tax Credits?

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