Chapter 3: Video Games Tax Relief
164.New section 1217C(1) to (6) provide that for a relief to be available a video game must satisfy a number of criteria and also sets out how relief will be given and the procedure for making claims. The criteria include:
Being intended for supply;
Being a British video game as required by new section 1217CB; and,
Having the required level of core expenditure as required by new section 1217CE.
165.New section 1217C (4) provides that where relief has already been given for R&D tax credits on the same expenditure then relief is not available for video games tax relief. This is to prevent double claims on the same expenditure.
166.New section 1217CA (1) provides that a video game must be intended for supply to the general public.
167.New section 1217CA (2) provides that the question of whether this condition is met is to be determined when the video game development activities begin. And also provides for circumstances where a game starts out being intended for supply even if subsequently the intention changes. However, where the original intention is not to supply the game to the general public the condition will not be met.
168.New sections 1217CB(1) to (6) provide that a video game development company must apply to the Secretary of State for a video game to be certified as British and that certain conditions must be met in a ‘cultural test’.
169.New sections 1217CC(1) to (2) provide that for applications for certification of the video game as British are to be made to the Secretary of State and that the application may be for an interim or final certificate.
170.New sections 1217CC (3) and (4) define what is meant by an ‘interim’ certificate and a ‘final’ certificate’.
171.New sections 1217CC(5) to (6) provide that companies must provide the Secretary of State with all documents and information to determine an application and that the Secretary of State may require additional information to be provided for the purposes of the application and a declaration as to its truth.
172.New sections 1217CC (7) to (9) provide that the Secretary of State may, by regulations, amend the application process, particulars required etc.
173.New section 1217CD(1) to (2) provide that the Secretary of State shall certify a video game if he is satisfied that it meets the requirements for an interim or final certificate. However, if the Secretary of State is not so satisfied, he shall not certify the video game.
174.New sections 1217CD(3) and (4) allows an interim certificate to be given subject to certain conditions, and provides that the certificate may, if the Secretary of State wishes, be given an expiry date. In any case an interim certificate expires when a corresponding final certificate is issued.
175.New sections 1217CD (5) and (6) provide that the Secretary of State shall revoke a certificate if it becomes clear that it should not have been issued. A revoked certificate is treated as never having been issued (unless the Secretary of State provides otherwise).
176.New sections 1217CE(1) and (2) impose another condition for relief; that not less that 25 per cent of the core expenditure on the video game must be UK expenditure. HM Treasury may vary this minimum percentage of UK expenditure by regulations.
177.New sections 1217CF(1) and (2) provide that the company may claim an additional deduction, based on its qualifying expenditure on the video game to be taken into account in calculating its profit or loss from its separate video game trade. The additional deduction and the payable tax credit together make up the new tax relief.
178.New section 1217CF (3) defines ‘qualifying expenditure’ for this purpose.
179.New section 1217CF (4) allows HM Treasury, by regulation, to amend subsection (3) and to provide that particular sorts of expenditure are or are not qualifying expenditure.
180.New section 1217CG (1) applies in the first period of account in which the separate video game trade is carried on. For this period, the additional deduction is given by E where E is the lesser of the amount of qualifying expenditure which is UK expenditure or 80 per cent of that amount.
181.New section 1217CG (2) applies in the subsequent periods of account. In such periods the, the additional deduction is E – P where E is now either the lesser of the qualifying expenditure to date (i.e. the sum for the current period and all subsequent periods) which is UK expenditure or 80 per cent of that amount, which ever is less. P is the total amount of additional deduction for all previous periods.
182.New section 1217CG (3) allows HM Treasury to amend section 1216CG.
183.New section 1217CH(1) provides that a video games development company (as defined in new section 1217AB) may claim a video games tax credit in an accounting period for which it has a surrenderable loss.
184.New section 1217CH (2) defines the surrenderable loss. This is the lesser of the trading loss and the available qualifying expenditure.
185.New section 1217CH(3) calculates the available loss for an accounting period as L plus RUL where L is the amount of the company’s loss for the period and, RUL is the amount of any relevant unused loss. RUL is defined further in new section 1217CH (4).
186.New section 1217CH (4) defines “relevant unused loss” of a company as that part of a loss neither surrendered for tax credit under new section 1217CI (1) nor carried forward under section 45 of the Corporation Tax Act 2010.
187.New section 1217CH (5) defines the available qualifying expenditure for the first period of account during which the trade is carried on as the amount E defined in 1217CG (1).
188.New section 1217CH(6) defines the available qualifying expenditure for subsequent periods as E minus S, where E is the amount defined in new section 1217CG(2) and S is the aggregate of the amounts surrendered for video games tax credit in previous periods as defined by new section 1217CI(1).
189.New section 1217CH (7) provides for any necessary apportionments where a period of account of the separate video game trade does not coincide with an accounting period.
190.New section 1217CI (1) provides that a company may surrender all or part of its surrenderable loss for a period.
191.New section 1217CI (2) sets the payable tax credit rate as 25%.
192.New section 1217CI (3) provides that where part of the loss is surrendered a company’s available loss will be reduced by the surrendered amount.
193.New section 1217CJ(1) provides that where a company is entitled to a video games tax credit for a period, and it claims that credit, the Commissioners for Her Majesty’s Revenue and Customs will pay the credit to the company.
194.New section 1217CJ(2) provides that an amount of credit that is payable, or an amount of interest payable under section 826 Income and Corporation Taxes Act 1988, may be set against any corporation tax that the company owes, and that if it is so set. The Commissioners’ obligation under new section 1217CJ (1) is met.
195.New section 1217CJ (3) overrules new section 1217CJ (1) when the company’s tax return is enquired into by HM Revenue and Customs, so that no payment need then be made to the company. HM Revenue and Customs may however make such provisional payments as it deems fit.
196.New section 1217CJ(4) overrules new section 1217CJ(1) so that when the company owes HM Revenue and Customs any amount of PAYE, Class 1 National Insurance contributions or any amount due no payment need to be made to the company.
197.New section 1217CJ (5) provides that a payment of a video games tax credit is not income for the company for any tax purpose.
198.New section1217CK (1) provides that no amount is to be included in costs for a period if it is still unpaid four months after the period ends.
199.New section 1217CK (2) provides that new section 1217CK (1) does not override the normal operation of new section 1217BD (when costs are taken to be incurred).
200.New section 1217CL is a general anti avoidance provision, which denies video games development tax relief to the extent that it arises from artificially inflated claims.
201.New section 1217CL(1) sets out that where a transaction is attributable to arrangements entered into (wholly or partly) for a disqualifying purpose, that transaction is disregarded in determining the amount of additional deduction or video games tax credit due.
202.New section 1217CL (2) sets out when arrangements are entered into for a disqualifying purpose. This is when their main object, or one of their main objects, is to enable a company to obtain an additional deduction or a video games tax credit that it would otherwise not be entitled to, or a larger deduction or greater amount of video games tax credit than it would otherwise be entitled to.
203.New section 1217CL (3) defines “arrangements”.
204.New section 1217CM (1) to (4) allow HM Revenue and Customs to disclose information to the Secretary of State for the purposes of his functions and also allows for the same information to be disclosed to the British Film Institute.
205.New section 1217CM (5) imposes a duty of confidentiality on any person to whom the information is disclosed under new sections 1217CM (1) and (3).
206.New section 1217CN (1) provides that a person commits an offence if he discloses information about an identifiable person in contravention of new section 1217CM.
207.New section 1217CN (2) provides a defence for a person charged with such an offence that he believed the disclosure to be lawful, or the information had already lawfully been made public.
208.New section 1217CN (3) and (6) sets out the penalties for a person convicted of wrongful disclosure.
209.New section 1217CN (4) provides that a prosecution may only be brought in England and Wales by the Director of Revenue and Customs Prosecution or with the consent of the Director of Public Prosecutions.
210.New section 1217CN(5) provides that a prosecution may only be brought in Northern Ireland by the Commissioners for HM Revenue and Customs or with the consent of the Director of Public Prosecutions for Northern Ireland.
