How much UK expenditure do I need to qualify for Video Games Expenditure Credit?

Game studios often worry that outsourcing development work overseas will disqualify them from claiming tax relief. It's a common concern, especially for smaller studios trying to keep costs down by using international talent.

The good news is you can still claim the Video Games Expenditure Credit, even if most of your development happens abroad. The requirement is straightforward: at least 10% of your core development costs must be UK expenditure.

How much UK expenditure do I need to qualify for VGEC?

To qualify for the Video Games Expenditure Credit, at least 10% of your core costs must be UK expenditure.

That means you could theoretically spend 90% of your budget abroad and still make a valid claim on the 10% spent in the UK.

What counts as 'core costs' for a VGEC claim?

Core costs are the costs directly tied to designing, producing and testing your game.

HMRC recognises four development phases:

• Initial concept design: exploring whether the game is commercially viable
• Design (pre-production): planning the game's structure and mechanics
• Production: building the game itself
• Testing: debugging and refining before release

Only the last three phases are eligible for VGEC.

The crucial point is when your project gets "green-lit". Expenditure when you're still deciding whether to proceed is speculative and doesn't qualify. Once you commit to development, your costs become claimable. If you eventually abandon your game, you can still claim for the costs spent developing it up until the point you decide not to go ahead.

Commercial activity doesn't count. Once your game reaches its minimum viable product (MVP) and could conceivably be released, any subsequent costs for distribution, marketing or finance fall outside the scheme.

How much can I claim through VGEC?

Your claim is capped at the lower of:

• 80% of total core costs (if more than 80% of costs are in the UK)
• Your actual UK core costs (if less than 80% of costs are in the UK)

For example:

Company A spent £500,000 on core development, including £100,000 in the UK. It can claim on the full £100,000 of its UK expenditure (as this meets the 10% threshold and is under 80% of the total).

Company B spent £500,000 entirely in the UK. It can claim on £400,000, which is 80% of the total.

You will need to provide your budget details to HMRC when you make your claim. Before you submit your claim via the Corporation Tax return, you’ll need to send off your Additional Information Form. This

Is there a minimum or maximum claim value?

No. There's no floor or ceiling on your expenditure or claim value. The only requirement is that 10% threshold for UK costs.

We’ve seen claims for tens of thousands up to millions of pounds of UK expenditure. To make a good value claim, you should consider the amount of time it takes to make a strong claim and whether this is worth the return you’d get from HMRC. For weeks of work applying to BFI and preparing your trade schedules for HMRC, you need to know how much you’ll be getting back from HMRC at the end.

What are the qualifying criteria for VGEC?

If you're a UK-registered company developing your own video game, you'll likely qualify for VGEC.

You must be registered for UK Corporation Tax. Individuals, partnerships and LLPs can't claim.

HMRC looks for the company that's actually making the game. This is the company that’s designing, producing and testing it. You also need to play an active role in planning, decision-making and contracting for rights.

Your game must be intended for public release and certified as "British" by the British Film Institute. There are also some restrictions on what games can qualify (e.g., advertising, gambling or pornographic games do not qualify).

For a full breakdown on the qualifying criteria for this scheme, check out our blog: Is Your Game Eligible for VGEC? A Simple Checklist

Making your VGEC claim

Getting good value for your claim starts with knowing exactly what your game is worth. Many games developers choose to work with specialist tax advisers to prepare their claims, cutting down on time and resources spent gathering and submitting information to BFI and HMRC.

If you'd like us to review your game development costs and assess your eligibility, get in touch.