You may have seen in the news that the UK games industry – represented by TIGA – has been having an arm wrestle with EU regulators over ‘Video Games Development Reliefs’ in recent months.
If the industry is successful, the new tax relief specifically targeted at the UK games industry will come into effect that will see tax relief worth up to 25% of wide-ranging qualifying expenditure. This will be a considerable boon to the sector.
For now though games developers must await the outcome with baited breath.
Tax relief for the computer games industry
But I am developing games now. How can I benefit from existing tax reliefs?
It can be surprisingly simple to get tax relief if you use an expert. As alluded to above, the reliefs relate to (R&D) – a term which has a much broader definition than most people realise.
It’s easy to get hung up on the word ‘research’ when considering R&D. But who makes video games: Developers, so even in the basic language we can see that there is a link.
How an R&D tax credit specialist can help a video games developer
There are a host of R&D rules that can potentially apply to software development, but it can often take an experienced Tax Adviser to identify the relevant expenditure. A qualified taxation professional, with experience of the R&D Tax Credit system, will be able to work with you to help identify all of the relevant spend. In instances where individuals have tried to apply the rules of the scheme themselves, we’ve managed on occasion to increase the value of their claim by thousands of percent by applying our years of expertise.
A specialist will look at your projects and pick out the elements that could potentially qualify. Calculating the costs that can be attributed which include staff, freelancers, utilities, and software licenses among other things.
They can then prepare the claim, or work alongside existing advisers and deal with the submission process. The whole claim process typically takes about 10-12 weeks.
A risk free way of claiming
Many R&D Tax Credit specialists operate on a contingent basis. So there is no risk to the business of attempting to claim under the scheme. You will generally be charged a success fee if your claim is successful, meaning most advisers will give you an honest appraisal of your chances of success, as they are bearing the burden of managing the claim.
How much could a claim be worth?
For an SME the claim can be worth 25p for every £1 spent on qualifying R&D. This can often add up to significant sums. For many companies the claims turn out to be worth tens or even hundreds of thousands of pounds. Can you, as a video games developer, afford not to explore the possibilities?
I expect to make a loss – is there still tax relief available?
If you make a loss but carry out qualifying R&D, your R&D claims enhance your loss, for tax purposes. You then have three options:
- Carry the loss back to the previous accounting period and offset it against the profit in that year;
- Carry the loss forward to a future profitable year; or
- Surrender the loss to HMRC in exchange for a cash credit.
I wish I had known about this last year?
Don’t worry, the rules permit you to back date a claim to your previous accounting period so if you didn’t claim last year, you can potentially double up this year.
What are the next steps for a video game developer?
As you can see the benefits can be considerable – impossible to ignore even. A quick phone call can normally identify whether an R&D claim exists so why not call today on 0117 926 9022? It is one of those rare instances when there is no risk, but there is the potential for significant reward.