Games
UK Video Game Tax Relief: VGTR and VGEC Explained
A plain-language guide to claiming tax relief on game development expenditure in the UK. Updated for 2026.
What Is Video Game Tax Relief?
The UK government offers tax relief to companies that develop video games in the United Kingdom. The scheme exists to encourage game development as a creative industry, keep skilled jobs in the UK, and attract international studios to base production here.
There are two versions of the relief, one old and one current:
VGTR (Video Games Tax Relief)
The original scheme, introduced in April 2014. VGTR allowed qualifying companies to claim an additional deduction in their Corporation Tax return, resulting in an effective tax relief of up to 20% of UK core expenditure. VGTR applied to accounting periods beginning before 1 April 2025. If your project started under VGTR, transitional rules may still apply.
VGTR capped the amount of subcontractor expenditure that could be included in qualifying costs.
VGEC (Video Games Expenditure Credit)
The replacement scheme, effective for expenditure incurred from 1 January 2024. VGEC is an above-the-line expenditure credit rather than a tax deduction. The headline credit rate is 34% of qualifying expenditure, which after Corporation Tax gives an effective net benefit of approximately 25.5% for profitable companies (or a higher effective rate for loss-making companies that can claim a payable credit).
VGEC removed the subcontractor expenditure cap, making it significantly more generous for studios that rely on external development partners.
Disclaimer: Ocean View Games is a game development studio, not a tax adviser. The information on this page is a general guide based on publicly available HMRC and BFI documentation. For advice specific to your company, consult a qualified accountant or tax specialist with experience in creative industry reliefs.
Who Can Claim?
To claim VGEC, your company must meet all of the following criteria. There is no minimum budget or team size requirement.
UK-Registered Company
The claimant must be a company registered in the United Kingdom and liable for UK Corporation Tax. Sole traders, partnerships, and overseas entities cannot claim directly, though an overseas studio can set up a UK subsidiary specifically for this purpose.
Video Game Development Company (VGDC)
The company must be the Video Game Development Company for the game in question. This means being actively involved in the design, production, and testing of the game. Only one company per game can be the VGDC.
Intended for Public Release
The game must be intended for supply to the general public. Internal training tools, private commissions, and games developed solely for gambling purposes do not qualify.
BFI Cultural Test Certification
The game must be certified as British by the British Film Institute (BFI) by passing the cultural test. This requires scoring at least 16 out of 31 points across four categories. See the section below for details.
25% UK or EEA Expenditure
At least 25% of the total core expenditure must be spent on goods or services provided from within the UK or the European Economic Area. This includes salaries paid to UK/EEA-based staff and payments to UK/EEA-based subcontractors.
The BFI Cultural Test
The cultural test determines whether your game qualifies as a “British video game.” You need 16 out of 31 points across four sections.
Section A: Cultural Content
Up to 16 points
Based on the game's setting, characters, story, and dialogue. Points are awarded for British or European cultural themes, locations, and languages. A game set in London with English dialogue would score highly here.
Section B: Cultural Contribution
Up to 4 points
Assessed on creativity, innovation, and contribution to education or cultural understanding. Games that push creative boundaries or address cultural themes score well.
Section C: Cultural Hubs
Up to 3 points
Points for where the work is carried out. Development, post-production, and other activities performed in the UK contribute to this section. Studios based in the UK score these points by default.
Section D: Cultural Practitioners
Up to 8 points
Based on the nationality or residency of key personnel. Points are awarded for having UK or EEA nationals in roles such as project lead, designer, writer, programmer, composer, and artist.
You apply for certification in two stages: an interim certificate at the start of development (based on projected scores) and a final certificate once the game is complete (based on actual scores). The interim certificate allows you to make claims during development rather than waiting until the game ships.
For the full scoring criteria and application forms, visit the BFI certification page.
What Expenditure Qualifies?
Qualifying expenditure covers the core costs of designing, producing, and testing the video game. Not all spending on a game project counts.
Qualifying Costs
- ✓Game design and prototyping
- ✓Software development and programming
- ✓Art, animation, and visual effects
- ✓Audio design, music, and voice recording
- ✓Quality assurance and testing
- ✓Salaries and wages for development staff
- ✓Payments to subcontractors and freelancers
- ✓Level design and content creation
- ✓Production management directly related to development
Non-Qualifying Costs
- ✗Initial concept work before the project is greenlit
- ✗Marketing, advertising, and promotion
- ✗Distribution and publishing costs
- ✗Post-release maintenance and live operations
- ✗Financing, legal, and accounting fees
- ✗Hardware and equipment purchases
- ✗Office rent and general overheads
- ✗Costs of developing gambling functionality
Under VGEC, there is no cap on the proportion of expenditure that can go to subcontractors. This is a significant change from the original VGTR, which limited subcontractor costs. For studios that work with external co-development partners, this makes VGEC considerably more valuable.
How to Claim
Claiming VGEC is a multi-step process that runs alongside your normal Corporation Tax filing. Here is the typical workflow.
Register Your Company
Ensure your company is registered for UK Corporation Tax with HMRC. If you are an overseas studio, you will need to establish a UK subsidiary.
Apply for a BFI Interim Certificate
Submit your cultural test application to the BFI at the start of development. The interim certificate is based on projected scores and allows you to begin claiming before the game is finished.
Keep Detailed Records
Maintain thorough records of all qualifying expenditure throughout development. Track costs by category (design, development, testing, audio, art) and by supplier location (UK, EEA, rest of world). Good records make the claim process significantly smoother.
Calculate Your Credit
At the end of each accounting period, calculate your qualifying UK/EEA expenditure. The VGEC credit is 34% of qualifying expenditure. Your accountant will determine whether the credit reduces your tax bill or results in a payable credit.
Include in Your CT600 Return
Submit your VGEC claim as part of your Corporation Tax return (CT600). The claim is made on supplementary pages specific to creative industry tax reliefs. Attach the BFI interim or final certificate.
HMRC Processing
HMRC will process your claim, typically within 6 to 12 weeks. If the claim results in a payable credit (because your company is loss-making or the credit exceeds your tax liability), HMRC will issue payment directly.
How This Affects International Studios
VGEC is not exclusively for British companies. International studios can access the relief in several ways, making it a genuine incentive for locating game development work in the UK.
Set Up a UK Subsidiary
The most straightforward route. Register a UK limited company, employ or contract UK-based developers, and claim VGEC through the subsidiary's Corporation Tax return. The subsidiary must be the VGDC and be genuinely involved in the creative process.
Partner with a UK Co-Development Studio
Work with a UK-based development partner who acts as the VGDC or supports your UK subsidiary's claim. The expenditure on UK co-development counts as qualifying spend. This is often the fastest way for international studios to access the relief without the overhead of establishing a full UK operation.
Meet the 25% UK/EEA Spend Threshold
Whichever route you take, at least 25% of core expenditure must be on UK or EEA goods and services. This means that purely offshore development with minimal UK involvement will not qualify, but a genuine co-development arrangement where significant work is performed in the UK can meet this threshold comfortably.
VGTR vs VGEC at a Glance
A side-by-side comparison of the original Video Games Tax Relief and the current Video Games Expenditure Credit.
| Feature | VGTR (Original) | VGEC (Current) |
|---|---|---|
| Effective Relief Rate | Up to 20% of qualifying expenditure | 34% headline credit (approx. 25.5% net after CT for profitable companies) |
| Tax Treatment | Additional deduction (below the line) | Expenditure credit (above the line), visible in profit & loss |
| Subcontractor Cap | Subcontractor costs capped as a proportion of core expenditure | No subcontractor cap |
| Availability | Accounting periods beginning before 1 April 2025 (transitional rules may apply) | Expenditure from 1 January 2024 onwards |
| R&D Interaction | Cannot claim R&D relief on same expenditure | Cannot claim R&D relief on same expenditure |
Frequently Asked Questions
Further Resources
Official Sources
BFI Cultural Test
Application forms, scoring criteria, and processing times.
HMRC Creative Industry Tax Reliefs
Official HMRC guidance on claiming VGEC and other creative industry reliefs.
Ukie Tax Relief Guide
The UK games industry trade body's overview of available tax reliefs.
TIGA
The Independent Game Developers' Association. Industry research, policy advocacy, and tax relief resources.
Maximise Your VGEC Eligibility
Planning a UK game development project? We can help you structure your co-development engagement to maximise your eligibility for VGEC. Get in touch for a free consultation.
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