Video Games Tax Credits and How Metric Can Help
To support the creative industry, the UK government offers Video Games Tax Credits to companies that are developing video games. This generous incentive allows eligible companies to reduce their tax liabilities or receive a payable tax credit based on development expenditure.
Here we’ll explain everything UK game developers need to know about HMRC’s scheme —including how it works and what counts as qualifying expenditure.
What are Video Games Tax Credits?
Video games tax credits are a government incentive that were introduced in 2014 as part of the UK’s creative sector tax reliefs, which also include Film, Animation, High-End TV, and Children’s TV reliefs. VGTR is designed to encourage investment in the UK’s video game development industry, ensuring it remains globally competitive and creatively rich.
Administered by HMRC and overseen by the British Film Institute (BFI) for cultural certification, video games tax credits enable UK game developers to:
- Claim back up a portion of their production costs
- Either reduce the Corporation Tax liability or receive a cash credit if loss-making
- Reinvest in future projects, talent, and growth
VGTR at a glance:
VGTR is a valuable incentive for UK game developers, offering significant tax relief on qualifying production costs. It encourages the creation of culturally relevant content and supports the UK’s thriving creative tech sector. Like film and animation tax reliefs, it forms part of the UK’s broader Creative Industry Tax Reliefs regime.
What video games developers need to know
The Video Games Expenditure Credit (VGEC) Scheme – key points
- a UK-focused test, to ensure costs are incurred in the UK
- The headline tax relief rate is 34%
- HMRC have tightly defined what costs may be claimed
- There is a single system for film, TV and games, simplifying cross-industry claims
- There is no subcontracting cap
Digital filing requirements
- Claims must be submitted digitally
- Include detailed supporting documents, including a breakdown of costs and cultural certification (from the British Film Institute) and an HMRC additional information form (AIF)
- Demonstrate clear links between expenditure and qualifying activities
Qualification conditions
Who can claim video tax credits?
To qualify for any of these schemes, a company must meet a series of criteria related to:
The type of company
Only video game development companies (VGDCs) can claim. This means the company must be responsible for:
- Designing
- Producing
- Testing, and
- Developing the video game
A single entity must oversee the game’s development. Publishers or distributors who are not involved in the creative and technical aspects of production cannot claim video tax credits.
Qualifying games
Not every game is eligible. For a game to qualify for tax relief, it must:
- Be intended for supply to the general public
- Pass the Cultural Test (see below)
- Incur at least 25% of its core expenditure in the UK
Importantly, the tax reliefs do not apply to games developed for advertising, promotional purposes, or for gambling.
Eligibility conditions
Understanding the cultural test
To ensure taxpayer money supports culturally significant works, the UK requires all applicants to pass a Cultural Test administered by the BFI (British Film Institute) on behalf of the government.
The Cultural Test assesses:
- UK setting, characters, and subject matter
- Contribution to cultural diversity
- Use of UK -based staff
- Use of UK facilities and locations
A score of at least 16 out of 31 points is required to qualify. The test results in either:
- Interim certification (for projects still in production)
- Final certification (once the project is complete)
Without this certification, the tax relief cannot be claimed. Submissions can be made online, and while the process is rigorous, it is generally straightforward if the game has a clear cultural footprint or is produced predominantly in the UK.
How does tax relief work? The financial mechanics explained
When it comes to calculating the tax relief, there are specific rules and percentages developers need to understand. VGTR works by allowing game development companies to:
- Deduct an additional amount from their taxable profits, or
- Surrender losses in return for a payable tax credit
Here’s a breakdown:
Step 1: Identify qualifying expenditure
Video tax credits applies to core expenditure, which includes:
- Design
- Production
- Testing
Excluded are non-core expenses such as:
- Debugging post-release
- Marketing and distribution
- Financing and overheads
Step 2: Determine UK-eligible spend
Companies can claim expenditure credit on only UK costs
Step 3: Calculate the credit
Companies can claim subcontractor costs provided the subcontractors are located in the UK. The video games tax credit scheme applies a single effective rate of 34% to UK-based qualifying expenditures.
Timeframes
How long does the claim process take?
Pre-production
- Ensure your company structure qualifies
- Apply for interim certification via the BFI, as it can take up to six weeks to obtain the certificate ensure you apply as soon as possible
- Keep meticulous records from day one
During development
- Track all qualifying core costs
- Maintain contracts, timesheets, and project records
- Identify UK personnel and services
Post-production
- Apply for final certification from the BFI, again to avoid delaying your submission ensure that you apply for this as soon as the project is completed. You will need to submit your final certificate to HMRC with our claim.
- Submit your claim via your Company Tax Return (CT600)
- Include your claim, cultural certificate, and supporting calculations
HMRC processing
- HMRC aims to process claims within 28 days, although timelines vary
- Claims can be made up to two years after the end of the accounting period
Metric’s process step-by-step
Kick-off meeting
We will start the work with a kick off meeting where we will describe the process around your video games tax relief claim. At this meeting we will ensure that your company qualifies. We will establish how many games you can claim relief for. At this meeting we will also check if you have obtained your interim or final BFIs certificates for the games.
Engagement
Metric will decide the scope of your tax relief claim and provide a quote for our work, typically we work on a fixed fee basis. If you accept our quote we will issue an engagement letter.
Eligible costs
If Metric prepare other financial services, we will identify potential costs and provide these for you to review and establish what costs have been incurred for your different games.
Calculations of your tax relief claim
We will review your costing and the split of costs between your games and start the calculation of your tax relief claim. As HMRC doesn’t just look at the cost incurred this year but your cumulative numbers per game we will also ensure that any earlier year’s costs are included in the cumulative calculation.
Submission and HMRC questions
It normally takes 4-6 weeks before you receive a potential tax refund. If HMRC has any follow up questions Metric would deal with these and any additional work required to respond to HMRC would be covered by our tax assistance insurance.
Finalisation of the claim
When we are happy with the calculation of your tax relief claim we will produce your tax return and its supplementary pages and reflect your tax credit claim in your year-end accounts. As part of this stage, we will also prepare the Additional Information Form (AIF) that is submitted to HMRC ahead of the tax return submission. Ahead of any submission we would always share the documents for you to review and approve.
Common challenges in making a claim
Despite being one of the most valuable incentives available, many developers either underclaim, misclaim, or fail to claim at all. Common pitfalls include:
1. Failure to pass the Cultural Test
Missing this certification—or misunderstanding its criteria—will invalidate your claim.
2. Incorrect company structure
Only the lead developer can claim. Companies acting purely as publishers or funding bodies may not qualify.
3. Ineligible expenditure
Including marketing, distribution, or non-core costs may result in overclaims or HMRC pushback.
4. Lack of documentation
The tax relief regimes require robust documentation—both technical and financial. Poor record-keeping can jeopardise your claim.
Why Metric may be perfect for you
At our firm, we specialise in supporting creative businesses, including some of the UK’s most exciting game developers. Here’s how we can help:
1. Specialists in video game tax relief claims
Metric don’t just know tax—we understand game development and what is required in order to optimise a video tax credit claim. As a firm of chartered accountants we are a professional advisor with a deep knowledge of the tax rules around the tax credit schemes.
This allows us to translate your work into the language HMRC understands.
2. Maximised and compliant claims
We ensure your claim is optimised without overreaching. Our methodology uncovers eligible costs that many firms overlook, while carefully avoiding ineligible expenses that trigger enquiries.
3. Full-Service claim management
From BFI applications to preparing your CT600 and responding to HMRC, we provide an end-to-end solution, letting your team stay focused on building great games.
4. Audit-proof documentation
We prepare fully compliant technical and financial documentation tailored to HMRC’s latest expectations. Should HMRC raise a query, we handle the entire response process on your behalf.
5. Transparent fees
We operate on a fixed-fee model, meaning there are no hidden costs. We will include in our fee a tax investigation insurance that will cover for any additional accountancy fees in case of an investigation.
Case Studies: Results from real clients
“I’ve worked with Metric for over 5 years across two different businesses and their service has been nothing short of exceptional. Metric handles every aspect of our accounting across payroll, bookkeeping, financial statement preparation, as well as specialised advisory during fundraising and VGTR/VGEC applications etc. The technical competence and reliability of the team specifically for our needs as a VC-backed AI company has been a massive value add for Carter Labs. It’s an absolute pleasure to work closely with Lucinda, Maria, Eva and the whole team and I would strongly recommend Metric to any tech company/startup seeking a highly capable and dependable accountancy partner. Looking forward to the continued partnership with Metric long into the future.”
“The team has been fantastic! They have been guiding us through a complex VGTR process involving multiple overlapping games over several years. They have supported us end-to-end, from BFI applications and game certifications to submitting the claims, securing refunds, and also following up with HMRC during delays. Their payroll, bookkeeping, and annual accounts services are also excellent. Metric has consistently stepped in to help with our accounting paperwork, even at short notice for last-minute requests, and their support has been really invaluable during critical periods and challenging schedules.”
