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Tax relief for video games development |
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1 | After Part 15A of CTA 2009 (inserted by Schedule 15 above) insert— |
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(1) | This Part is about video games development. |
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(2) | Sections 1217AA to 1217AF contain definitions and other provisions |
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about interpretation that apply for the purposes of this Part. |
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(a) | section 1217AA, which contains provision about the meaning |
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(b) | section 1217AB, which explains how a company comes to be |
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treated as the video games development company in relation |
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(3) | Chapter 2 is about the taxation of the activities of a video games |
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development company and includes— |
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(a) | provision for the company’s activities in relation to its video |
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game to be treated as a separate trade, and |
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(b) | provision about the calculation of the profits and losses of |
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(4) | Chapter 3 is about relief (called “video games tax relief”) which can |
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be given to a video games development company— |
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(a) | by way of additional deductions to be made in calculating the |
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profits or losses of the company’s separate trade, or |
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(b) | by way of a payment (a “video game tax credit”) to be made |
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on the company’s surrender of losses from that trade. |
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(5) | Chapter 4 is about the relief which can be given for losses made by a |
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video games development company in its separate trade, including |
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provision for certain such losses to be transferred to other separate |
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(a) | for relief under Chapters 3 and 4 to be given on a provisional |
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(b) | for such relief to be withdrawn if it turns out that conditions |
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that must be met for such relief to be given are not actually |
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(1) | This section applies for the purposes of this Part. |
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(2) | “Video game” does not include— |
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(a) | anything produced for advertising or promotional purposes, |
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(b) | anything produced for the purposes of gambling (within the |
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meaning of the Gambling Act 2005). |
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(3) | References to a video game include the game’s soundtrack. |
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(4) | A video game is completed when it is first in a form in which it can |
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reasonably be regarded as ready for copies of it to be made and made |
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available to the general public. |
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1217AB | Video games development company |
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(1) | For the purposes of this Part “video games development company” |
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is to be read in accordance with this section. |
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(2) | There cannot be more than one video games development company |
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in relation to a video game. |
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(3) | A company is the video games development company in relation to |
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a video game if the company (otherwise than in partnership)— |
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(a) | is responsible for designing, producing and testing the video |
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(b) | is actively engaged in planning and decision-making during |
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the design, production and testing of the video game, and |
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(c) | directly negotiates, contracts and pays for rights, goods and |
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services in relation to the video game. |
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(4) | If there is more than one company meeting the description in |
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subsection (3), the company that is most directly engaged in the |
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activities referred to in that subsection is the video games |
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development company in relation to the video game. |
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(5) | If there is no company meeting the description in subsection (3), |
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there is no video games development company in relation to the |
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(6) | A company may elect to be regarded as a company which does not |
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meet the description in subsection (3). |
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(a) | must be made by the company by being included in its |
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company tax return for an accounting period (and may be |
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included in the return originally made or by amendment), |
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(b) | may be withdrawn by the company only by amending its |
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company tax return for that accounting period. |
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(8) | The election has effect in relation to video games which begin to be |
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produced in that or any subsequent accounting period. |
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1217AC | “Video game development activities” etc |
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(1) | In this Part “video game development activities”, in relation to a |
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video game, means the activities involved in designing, producing |
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and testing the video game. |
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(2) | The Treasury may by regulations— |
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(a) | amend subsection (1), |
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(b) | provide that specified activities are or are not to be regarded |
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as video game development activities or as video game |
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development activities of a particular description, and |
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(c) | provide that, in relation to a specified description of video |
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game, references to video game development activities of a |
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particular description are to be read as references to such |
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activities as may be specified. |
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| “Specified” means specified in the regulations. |
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1217AD | “Core expenditure” |
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(1) | In this Part “core expenditure”, in relation to a video game, means |
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expenditure on designing, producing and testing the video game. |
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(2) | But the following descriptions of expenditure are not to be regarded |
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as core expenditure for the purposes of this Part— |
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(a) | any expenditure incurred in designing the initial concept for |
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(b) | any expenditure incurred in debugging a completed video |
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game or carrying out any maintenance in connection with |
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1217AE | “UK expenditure” etc |
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(1) | In this Part “UK expenditure”, in relation to a video game, means |
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expenditure on goods or services that are used or consumed in the |
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(2) | Any apportionment of expenditure as between UK expenditure and |
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non-UK expenditure for the purposes of this Part is to be made on a |
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just and reasonable basis. |
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(3) | The Treasury may by regulations amend subsection (1). |
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1217AF | “Company tax return” |
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| In this Part “company tax return” has the same meaning as in |
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Schedule 18 to FA 1998 (see paragraph 3(1)). |
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Taxation of activities of video games development company |
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Separate video game trade |
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1217B | Activities of video games development company treated as a separate |
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(1) | This Chapter applies for corporation tax purposes to a company that |
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is the video games development company in relation to a video |
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(2) | The company’s activities in relation to the video game are treated as |
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a trade separate from any other activities of the company (including |
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any activities in relation to any other video game). |
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(3) | In this Chapter the separate trade is called “the separate video game |
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(4) | The company is treated as beginning to carry on the separate video |
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(a) | when the design of the video game begins, or |
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(b) | if earlier, when any income from the video game is received |
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1217BA | Calculation of profits or losses of separate video game trade |
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(1) | This section applies for the purpose of calculating the profits or |
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losses of the separate video game trade. |
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(2) | For the first period of account the following are brought into |
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(a) | as a debit, the costs of the video game incurred (and |
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represented in work done) to date, and |
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(b) | as a credit, the proportion of the estimated total income from |
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the video game treated as earned at the end of that period. |
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(3) | For subsequent periods of account the following are brought into |
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(a) | as a debit, the difference between the amount of the costs of |
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the video game incurred (and represented in work done) to |
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date and the corresponding amount for the previous period, |
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(b) | as a credit, the difference between the proportion of the |
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estimated total income from the video game treated as earned |
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at the end of that period and the corresponding amount for |
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(4) | The proportion of the estimated total income treated as earned at the |
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end of a period of account is given by—![equation: cross[over[char[C],char[T]],char[I]]](missing.gif) |
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C is the total to date of costs incurred (and represented in work |
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T is the estimated total cost of the video game, and |
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I is the estimated total income from the video game. |
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1217BB | Income from the video game |
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(1) | References in this Chapter to income from the video game are to any |
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receipts by the company in connection with the production or |
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exploitation of the video game. |
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(a) | receipts from the sale of the video game or rights in it, |
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(b) | royalties or other payments for use of the video game or |
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aspects of it (for example, characters or music), |
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(c) | payments for rights to produce games or other merchandise, |
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(d) | receipts by the company by way of a profit share agreement. |
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(3) | Receipts that (apart from this subsection) would be regarded as of a |
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capital nature are treated as being of a revenue nature. |
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1217BC | Costs of the video game |
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(1) | References in this Chapter to the costs of the video game are to |
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expenditure incurred by the company on— |
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(a) | video game development activities in connection with the |
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(b) | activities with a view to exploiting the video game. |
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(2) | This is subject to any provision of the Corporation Tax Acts |
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prohibiting the making of a deduction, or restricting the extent to |
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which a deduction is allowed, in calculating the profits of a trade. |
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(3) | Expenditure that (apart from this subsection) would be regarded as |
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of a capital nature by reason only of being incurred on the creation of |
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an asset (the video game) is treated as being of a revenue nature. |
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1217BD | When costs are taken to be incurred |
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(1) | For the purposes of this Chapter costs are incurred when they are |
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represented in the state of completion of the work in progress. |
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(a) | payments in advance for work to be done are ignored until |
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the work has been carried out, and |
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(b) | deferred payments are recognised to the extent that the work |
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is represented in the state of completion. |
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(3) | The costs incurred on the video game are taken to include an amount |
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that has not been paid only if it is the subject of an unconditional |
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(4) | If an obligation is linked to income being earned from the video |
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game, no amount is to be brought into account in respect of the costs |
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of the obligation unless an appropriate amount of income is or has |
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been brought into account. |
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