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Finance (No. 2) BillPage 280

1217BE Estimates

Estimates for the purposes of this Chapter must be made as at the
balance sheet date for each period of account, on a just and
reasonable basis taking into consideration all relevant circumstances.

CHAPTER 3 5Video games tax relief

Introductory
1217C Availability and overview of video games tax relief

(1) This Chapter applies for corporation tax purposes to a company that
is the video games development company in relation to a video
10game.

(2) Relief under this Chapter (“video games tax relief”) is available to the
company if the conditions specified in the following sections are met
in relation to the video game—

(a) section 1217CA (intended for supply),

(b) 15section 1217CB (British video game), and

(c) section 1217CE (UK expenditure).

(3) Video games tax relief is given by way of—

(a) additional deductions (see sections 1217CF and 1217CG), and

(b) video game tax credits (see sections 1217CH to 1217CJ).

(4) 20But video games tax relief is not available in respect of any
expenditure if—

(a) the company is entitled to an R&D expenditure credit under
Chapter 6A of Part 3 in respect of the expenditure, or

(b) the company has obtained relief under Part 13 (additional
25relief for expenditure on research and development) in
respect of the expenditure.

(5) Sections 1217CK to 1217CN contain provision about unpaid costs,
artificially inflated claims and confidentiality of information.

(6) In this Chapter “the separate video game trade” means the
30company’s separate trade in relation to the video game (see section
1217B).

(7) See Schedule 18 to FA 1998 (in particular, Part 9D) for information
about the procedure for making claims for video games tax relief.

“Intended for supply”
1217CA 35 Intended for supply

(1) The video game must be intended for supply to the general public.

(2) Whether this condition is met is determined when video game
production activities begin, so that—

Finance (No. 2) BillPage 281

(a) where a video game is originally intended for supply, this
condition continues to be met even if that ceases to be the
intention, and

(b) where a video game is not originally intended for supply, this
5condition is not met even if that becomes the intention.

British video games
1217CB British video game

(1) The video game must be certified by the Secretary of State as a British
video game.

(2) 10The Secretary of State, with the approval of the Treasury, may by
regulations specify conditions which must be met by a video game
before it may be certified as a British video game.

These conditions are known as the “cultural test”.

These conditions are known as the “cultural test”.

(3) 15Regulations under subsection (2) may—

(a) specify different conditions in relation to different
descriptions of video game,

(b) provide that specified descriptions of video game may not be
certified as a British video game, and

(c) 20enable the Secretary of State to direct that any provision
made by virtue of paragraph (b) does not apply to a video
game that meets specified conditions.

“Specified” means specified in the regulations.

(4) Regulations under subsection (2) are to be made by statutory
25instrument.

(5) A statutory instrument containing regulations under subsection (2)
is subject to annulment in pursuance of a resolution of the House of
Commons.

(6) Sections 1217CC and 1217CD contain further provision about
30certification of video games as British video games, including
provision about applications for, and withdrawal of, certification.

1217CC Applications for certification

(1) An application for certification of a video game as a British video
game is to be made to the Secretary of State by the video games
35development company.

(2) The application may be for an interim or final certificate.

(3) An interim certificate is a certificate that—

(a) is granted before the video game is completed, and

(b) states that the video game, if completed in accordance with
40the proposals set out in the application, will be a British video
game.

(4) A final certificate is a certificate that—

(a) is granted after the video game is completed, and

(b) states that the video game is a British video game.

Finance (No. 2) BillPage 282

(5) The applicant must provide the Secretary of State with any
documents or information which the Secretary of State requires in
order to determine the application.

(6) The Secretary of State may require information provided for the
5purposes of the application to be accompanied by a statutory
declaration, made by the person providing it, as to the truth of the
information.

(7) The Secretary of State may by regulations make provision
supplementing this section, including—

(a) 10provision about the form of applications,

(b) provision about the particulars and evidence necessary for
satisfying the Secretary of State that a video game meets the
cultural test, and

(c) provision that any statutory declaration which is required by
15subsection (6) to be made by any person may be made on the
person’s behalf by such person as is specified in the
regulations.

(8) Regulations under subsection (7) are to be made by statutory
instrument.

(9) 20A statutory instrument containing regulations under subsection (7)
is subject to annulment in pursuance of a resolution of the House of
Commons.

1217CD Certification and withdrawal of certification

(1) If the Secretary of State is satisfied that the requirements are met for
25interim or final certification of a video game as a British video game,
the Secretary of State must certify the video game accordingly.

(2) If the Secretary of State is not satisfied that those requirements are
met, the Secretary of State must refuse the application.

(3) An interim certificate—

(a) 30may be given subject to conditions, and (unless the Secretary
of State directs otherwise) is of no effect if the conditions are
not met, and

(b) may be expressed to expire after a specified period, and
(unless the Secretary of State directs otherwise) ceases to have
35effect at the end of that period.

(4) An interim certificate ceases to have effect when a final certificate is
issued.

(5) If it appears to the Secretary of State that a video game certified
under this Part ought not to have been certified, the Secretary of State
40may revoke its certification.

(6) Unless the Secretary of State directs otherwise, a certificate that is
revoked is treated as never having had effect.

Finance (No. 2) BillPage 283

UK expenditure
1217CE UK expenditure

(1) At least 25% of the core expenditure on the video game incurred by
the company must be UK expenditure.

(2) 5The Treasury may by regulations amend the percentage specified in
subsection (1).

Additional deductions
1217CF Additional deduction for qualifying expenditure

(1) If video games tax relief is available to the company, it may (on
10making a claim) make an additional deduction in respect of
qualifying expenditure on the video game.

(2) The deduction is made in calculating the profit or loss of the separate
video game trade.

(3) In this Chapter “qualifying expenditure” means core expenditure on
15the video game that falls to be taken into account under Chapter 2 in
calculating the profit or loss of the separate video game trade for tax
purposes.

(4) The Treasury may by regulations—

(a) amend subsection (3), and

(b) 20provide that expenditure of a specified description is or is not
to be regarded as qualifying expenditure.

1217CG Amount of additional deduction

(1) For the first period of account during which the separate video game
trade is carried on, the amount of the additional deduction is—


25

E

where E is—

(a) so much of the qualifying expenditure as is UK expenditure,
or

(b) if less, 80% of the total amount of qualifying expenditure.

(2) 30For any period of account after the first, the amount of the additional
deduction is given by—


E − P

where—

  • E is—

    (a)

    35so much of the qualifying expenditure incurred to
    date as is UK expenditure, or

    (b)

    if less, 80% of the total amount of qualifying
    expenditure incurred to date, and

  • P is the total amount of the additional deductions given for
    40previous periods.

(3) The Treasury may by regulations amend this section.

Finance (No. 2) BillPage 284

Video game tax credits
1217CH Video game tax credit claimable if company has surrenderable loss

(1) If video games tax relief is available to the company, it may claim a
video game tax credit for an accounting period in which it has a
5surrenderable loss.

(2) The company’s surrenderable loss in an accounting period is—

(a) the company’s available loss for the period in the separate
video game trade (see subsection (3)), or

(b) if less, the available qualifying expenditure for the period (see
10subsections (5) and (6)).

(3) The company’s available loss for an accounting period is given by—


L + RUL

where—

  • L is the amount of the company’s loss for the period in the
    15separate video game trade, and

  • RUL is the amount of any relevant unused loss of the company
    (see subsection (4)).

(4) The “relevant unused loss” of a company is so much of any available
loss of the company for the previous accounting period as has not
20been—

(a) surrendered under section 1217CI(1), or

(b) carried forward under section 45 of CTA 2010 and set against
profits of the separate video game trade.

(5) For the first period of account during which the separate video game
25trade is carried on, the available qualifying expenditure is the
amount that is E for that period for the purposes of section
1217CG(1).

(6) For any period of account after the first, the available qualifying
expenditure is given by—


30

E − S

where—

  • E is the amount that is E for that period for the purposes of
    section 1217CG(2), and

  • S is the total amount previously surrendered under section
    351217CI(1).

(7) If a period of account of the separate video game trade does not
coincide with an accounting period, any necessary apportionments
are to be made by reference to the number of days in the periods
concerned.

1217CI 40 Surrendering of loss and amount of video game tax credit

(1) The company may surrender the whole or part of its surrenderable
loss in an accounting period.

(2) If the company surrenders the whole or part of that loss, the amount
of the video game tax credit to which it is entitled for the accounting
45period is 25% of the amount of the loss surrendered.

Finance (No. 2) BillPage 285

(3) The company’s available loss for the accounting period is reduced by
the amount surrendered.

1217CJ Payment in respect of video game tax credit

(1) If the company—

(a) 5is entitled to a video game tax credit for a period, and

(b) makes a claim,

the Commissioners for Her Majesty’s Revenue and Customs (“the
Commissioners”) must pay to the company the amount of the credit.

(2) An amount payable in respect of—

(a) 10a video game tax credit, or

(b) interest on a video game tax credit under section 826 of ICTA,

may be applied in discharging any liability of the company to pay
corporation tax.

To the extent that it is so applied the Commissioners’ liability under
15subsection (1) is discharged.

To the extent that it is so applied the Commissioners’ liability under
subsection (1) is discharged.

(3) If the company’s company tax return for the accounting period is
enquired into by the Commissioners, no payment in respect of a
20video game tax credit for that period need be made before the
Commissioners’  enquiries are completed (see paragraph 32 of
Schedule 18 to FA 1998).

In those circumstances the Commissioners may make a payment on
a provisional basis of such amount as they consider appropriate.

25In those circumstances the Commissioners may make a payment on
a provisional basis of such amount as they consider appropriate.

(4) No payment need be made in respect of a video game tax credit for
an accounting period before the company has paid to the
Commissioners any amount that it is required to pay for payment
30periods ending in that accounting period—

(a) under PAYE regulations,

(b) under section 966 of ITA 2007 (visiting performers), or

(c) in respect of Class 1 national insurance contributions under
Part 1 of the Social Security Contributions and Benefits Act
351992 or Part 1 of the Social Security Contributions and
Benefits (Northern Ireland) Act 1992.

(5) A payment in respect of a video game tax credit is not income of the
company for any tax purpose.

Miscellaneous
1217CK 40 No account to be taken of amount if unpaid

(1) In determining for the purposes of this Chapter the amount of costs
incurred on a video game at the end of a period of account, ignore
any amount that has not been paid 4 months after the end of that
period.

(2) 45This is without prejudice to the operation of section 1217BD (when
costs are taken to be incurred).

Finance (No. 2) BillPage 286

1217CL Artificially inflated claims for additional deduction or tax credit

(1) So far as a transaction is attributable to arrangements entered into
wholly or mainly for a disqualifying purpose, it is to be ignored in
determining for any period—

(a) 5any additional deduction which a company may make under
this Chapter, and

(b) any video game tax credit to be given to a company.

(2) Arrangements are entered into wholly or mainly for a disqualifying
purpose if their main object, or one of their main objects, is to enable
10a company to obtain—

(a) an additional deduction under this Chapter to which it
would not otherwise be entitled or of a greater amount than
that to which it would otherwise be entitled, or

(b) a video game tax credit to which it would not otherwise be
15entitled or of a greater amount than that to which it would
otherwise be entitled.

(3) “Arrangements” includes any scheme, agreement or understanding,
whether or not legally enforceable.

1217CM Confidentiality of information

(1) 20Section 18(1) of the Commissioners for Revenue and Customs Act
2005 (restriction on disclosure by Revenue and Customs officials)
does not prevent disclosure to the Secretary of State for the purposes
of the Secretary of State’s functions under any of the provisions listed
in subsection (2).

(2) 25The provisions referred to in subsection (1) are—

(a) sections 1216CB to 1216CD (certification of relevant
programmes as British),

(b) sections 1217CB to 1217CD (certification of video games as
British), and

(c) 30Schedule 1 to the Films Act 1985 (certification of films as
British).

(3) Information so disclosed may be disclosed to the British Film
Institute.

(4) The Treasury may by order amend subsection (3)—

(a) 35so as to substitute for the person or body specified in that
subsection a different person or body, or

(b) in consequence of a change in the name of the person or body
so specified.

(5) A person to whom information is disclosed under subsection (1) or
40(3) may not otherwise disclose it except—

(a) for the purposes of the Secretary of State’s functions under
any of the provisions listed in subsection (2),

(b) if the disclosure is authorised by an enactment,

(c) in pursuance of an order of a court,

(d) 45for the purposes of a criminal investigation or legal
proceedings (whether civil or criminal) connected with the

Finance (No. 2) BillPage 287

operation of any of Parts 15 to 15B of this Act or Schedule 1 to
the Films Act 1985,

(e) with the consent of the Commissioners for Her Majesty’s
Revenue and Customs, or

(f) 5with the consent of each person to whom the information
relates.

1217CN Wrongful disclosure

(1) A person (“X”) commits an offence if—

(a) X discloses revenue and customs information relating to a
10person (as defined in section 19(2) of the Commissioners for
Revenue and Customs Act 2005),

(b) the identity of the person to whom the information relates is
specified in the disclosure or can be deduced from it, and

(c) the disclosure contravenes section 1217CM(5).

(2) 15If a person (“Y”) is charged with an offence under subsection (1), it is
a defence for Y to prove that Y reasonably believed—

(a) that the disclosure was lawful, or

(b) that the information had already and lawfully been made
available to the public.

(3) 20A person guilty of an offence under subsection (1) is liable—

(a) on conviction on indictment, to imprisonment for a term not
exceeding two years or a fine or both, or

(b) on summary conviction, to imprisonment for a term not
exceeding 12 months or a fine not exceeding the statutory
25maximum or both.

(4) A prosecution for an offence under subsection (1) may be brought in
England and Wales only—

(a) by the Director of Revenue and Customs Prosecutions, or

(b) with the consent of the Director of Public Prosecutions.

(5) 30A prosecution for an offence under subsection (1) may be brought in
Northern Ireland only—

(a) by the Commissioners for Her Majesty’s Revenue and
Customs, or

(b) with the consent of the Director of Public Prosecutions for
35Northern Ireland.

(6) In the application of this section—

(a) in England and Wales, in relation to an offence committed
before the commencement of section 282 of the Criminal
Justice Act 2003, or

(b) 40in Northern Ireland,

the reference in subsection (3)(b) to 12 months is to be read as a
reference to 6 months.

Finance (No. 2) BillPage 288

CHAPTER 4 Video game losses

1217D Application of sections 1217DA and 1217DB

(1) Sections 1217DA and 1217DB apply to a company that is the video
games development company in relation to a video game.

(2) 5In those sections—

1217DA Restriction on use of losses while video game in development

(1) 20This section applies if in a pre-completion period a loss is made in the
separate video game trade.

(2) The loss is not available for loss relief except to the extent that it may
be carried forward under section 45 of CTA 2010 to be set against
profits of the separate video game trade in a subsequent period.

1217DB 25 Use of losses in later periods

(1) This section applies to the following accounting periods of the
company (“relevant later periods”)—

(a) the completion period, and

(b) any subsequent accounting period during which the separate
30video game trade continues.

(2) Subsection (3) applies if a loss made in the separate video game trade
is carried forward under section 45 of CTA 2010 from a pre-
completion period to a relevant later period.

(3) So much (if any) of the loss as is not attributable to video games tax
35relief (see subsection (6)) may be treated for the purposes of loss
relief as if it were a loss made in the period to which it is carried
forward.

(4) Subsection (5) applies if in a relevant later period a loss is made in the
separate video game trade.

(5) 40The amount of the loss that may be—

(a) deducted from total profits of the same or an earlier period
under section 37 of CTA 2010, or

(b) surrendered as group relief under Part 5 of that Act,

Finance (No. 2) BillPage 289

is restricted to the amount (if any) that is not attributable to video
games tax relief (see subsection (6)).

(6) The amount of a loss in any period that is attributable to video games
tax relief is calculated by deducting from the total amount of the loss
5the amount there would have been if there had been no additional
deduction under Chapter 3 in that or any earlier period.

(7) This section does not apply to a loss to the extent that it is carried
forward or surrendered under section 1217DC.

1217DC Terminal losses

(1) 10This section applies if—

(a) a company (“company A”) is the video games development
company in relation to a qualifying video game,

(b) company A ceases to carry on its separate trade in relation to
that video game (“trade X”) (see section 1217B), and

(c) 15if company A had not ceased to carry on trade X, it could
have carried forward an amount under section 45 of CTA
2010 to be set against profits of trade X in a later period (“the
terminal loss”).

(2) If on cessation of trade X company A—

(a) 20is the video games development company in relation to
another qualifying video game, and

(b) is carrying on its separate trade in relation to that video game
(“trade Y”),

it may (on making a claim) make an election under subsection (3).

(3) 25The election is to have the terminal loss (or a part of it) treated as if it
were a loss brought forward under section 45 of CTA 2010 to be set
against the profits of trade Y in the first accounting period beginning
after the cessation and so on.

(4) Subsection (5) applies if on cessation of trade X—

(a) 30there is another company (“company B”) that is the video
games development company in relation to a qualifying
video game,

(b) company B is carrying on its separate trade in relation to that
video game (“trade Z”), and

(c) 35company B is in the same group as company A for the
purposes of Part 5 of CTA 2010 (group relief).

(5) Company A may surrender the terminal loss (or a part of it) to
company B.

(6) On the making of a claim by company B the amount surrendered is
40treated as if it were a loss brought forward by company B under
section 45 of CTA 2010 to be set against the profits of trade Z of the
first accounting period of that company beginning after the cessation
and so on.

(7) The Treasury may, in relation to the surrender of a loss under
45subsection (5) and the resulting claim under subsection (6), make
provision by regulations corresponding, subject to such adaptations
or other modifications as appear to them to be appropriate, to that

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