CREC027000 - Qualifying productions: video games
Meaning of 鈥榲ideo game鈥�听
The term 鈥榲ideo game鈥� is not itself defined within the legislation. It is therefore given its ordinary meaning.听
A video game is an electronic game that is played through a video device. The video device and equipment required听to play the game are separate from the game itself, even if the two are sold as a single product. The video game is the software and other electronically stored content and information, rather than the hardware it is played on.听
A video device means any device capable of producing听two- or three-dimensional听moving images.听Traditionally this would mean only a device including or attached to a television or monitor, but now it includes devices such as mobile phones and tablet devices as well as handheld portable games machines.听
Where a video game is designed to be played on a games machine, development of the hardware is not an element of design of the game.听This is true even if the hardware is only capable of being used in conjunction with the video game.听
The electronic game includes all the electronic content of the game that is required听to play that game. This includes audio content such as sound effects and soundtrack. It also includes any elements that are not interactive, such as filmed or animated sequences for narrative purposes, or options required to adapt the game to suit the desires of the player.听
A game must have sufficient capability for a player to directly control actions and events in some way. There must be an uncertain outcome for the product to be a game, where the player鈥檚 actions have a meaningful result in the outcome.
Please see CREC031100 for guidance on what counts as a separate video game.
Excluded games听
For the purposes of the Video Games Expenditure Credit听(VGEC), 鈥榲ideo game鈥� does听not include anything that is produced for advertising or promotional purposes, or for the purposes of gambling.听
The restriction on advertising or promotional purposes is intended to disqualify games which are predominantly produced听for advertising or promotional purposes. This would prevent a free video game designed to promote a film or animation from receiving relief.听
It is not intended to prohibit advertising being carried in games. This is common practice听for mobile phone apps,听which will typically offer a free version which carries advertising and one which may be purchased.听
The rule also does not automatically disallow games which are based on existing IP. For example, a video game听based on a TV series would be eligible provided it was not produced specifically to advertise the series, but merely to further exploit a popular franchise.听
Gambling is defined by reference to the Gambling Act 2005 (GA2005). This therefore means that gambling includes activities described as:听
gaming (GA2005/S6)听
betting (GA2005/S9)
participating in a lottery (GA2005/S14)
In relation to the Gambling Act, 'gaming' means playing a game of chance for a prize. A game is a 'game of a chance' even if it also involves an element of skill or where the element of chance can be eliminated by superlative skill. The prize must be money or money's worth. There is no need听for there to be any other participators in the game, nor does the player have to risk losing anything.听
Video games can involve elements which are akin to gambling except for the fact that real money (or a currency that carries money鈥檚 worth) is not used. These games are not made for gambling purposes. For example, a poker video game would not constitute听gambling unless there was a mechanism within the video game itself for winning prizes of real money听or money's worth.听
If a video game includes the ability to 鈥渃ash out鈥� a currency of real monetary听value that may be won through skill or chance within the game, then it is likely that it will constitute听gambling.听This applies to cryptocurrencies and NFTs acquired听in a video game that can be traded/sold outside of the video game itself.听
If a game has a closed economy which allows players to put money into the game but not extract money or money鈥檚 worth, that game will not constitute听gambling.听Many听video games听include the ability to purchase听more resources for use in the game or have prizes which听can only be used in the game itself (e.g.听cosmetic items). This is a common means of monetising听video games in the mobile phone app market.听The inclusion of such purchases and prizes may not in itself be an indicator of gambling, provided there is no听marketplace which allows such items to be 鈥渃ashed out.鈥�听
If you have any concerns,听please contact the Creative Industries Unit (CREC010700).
Qualifying criteria听鈥� section 1179FA Corporation Tax Act (CTA) 2009听
A video game is a qualifying video game for VGEC if it meets the following criteria:听
it is intended for supply听
it is certified as British (see CREC028000)听
at least 10% of core expenditure on the game is UK expenditure (see CREC029000)
Meaning of 鈥榮upply鈥�听
鈥楽upply鈥� means supply to the general public. 鈥楽upply to the general public鈥� means being made available for members of the general public听to play. The game may be for sale in a physical format such as a disc, or听distributed via the internet.听
The fact that a video game is certified as British does not affect whether it is intended for supply. The British Film Institute (acting on behalf of the Department for Culture, Media and Sport) will certify video games that are not so intended.听
A video game may qualify as 鈥榠ntended for supply鈥� even if the intention is to gain a significant proportion听of the earnings from supply overseas, rather than in the UK (although a British video game would normally be expected to be intended for UK supply).
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Intention听
The legislation does not specify whose 鈥榠ntention鈥� this should be,听but at any time there will normally be someone entitled to determine听how the video game is to be exploited. This would generally be听the directors of the development company. However, there may be cases where someone else has a prior claim.听
It is not necessary for the video game to actually be supplied to retailers or made available via the internet to meet this condition.听However, if it was not eventually supplied, the question arises of whether it was ever so intended (and,听if so, when听the intention changed).听
If there is any doubt about the intention, the following factors could count in favour听of the video game being intended for supply:听
a finance plan written on the basis that the video game will be supplied听
a video game of a type commonly supplied听
development in a format suitable for supply听
payment to programmers, animators, voice artists and subcontractors on terms in line with those prevailing for video games听
the relevant person can demonstrate, at the end of the relevant accounting period, the intention to supply the video game to the general public听
Supply condition not met听
A video game can only be a qualifying programme听for VGEC for a particular accounting period if, at the end of that period, it is intended for supply.听
If a game is not intended for supply at the end of an accounting period, it cannot qualify for VGEC in respect of that period or any subsequent听accounting period (but credits given in previous听periods are not clawed back).听