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Finance Bill
Schedule 16 — Tax relief for video games development
Part 1 — Amendments of CTA 2009

284

 

1217AF  

“Company tax return”

   

In this Part “company tax return” has the same meaning as in

Schedule 18 to FA 1998 (see paragraph 3(1)).

Chapter 2

Taxation of activities of video games development company

5

Separate video game trade

1217B   

Activities of video games development company treated as a separate

trade

(1)   

This Chapter applies for corporation tax purposes to a company that

is the video games development company in relation to a video

10

game.

(2)   

The company’s activities in relation to the video game are treated as

a trade separate from any other activities of the company (including

any activities in relation to any other video game).

(3)   

In this Chapter the separate trade is called “the separate video game

15

trade”.

(4)   

The company is treated as beginning to carry on the separate video

game trade—

(a)   

when the design of the video game begins, or

(b)   

if earlier, when any income from the video game is received

20

by the company.

1217BA  

Calculation of profits or losses of separate video game trade

(1)   

This section applies for the purpose of calculating the profits or

losses of the separate video game trade.

(2)   

For the first period of account the following are brought into

25

account—

(a)   

as a debit, the costs of the video game incurred (and

represented in work done) to date, and

(b)   

as a credit, the proportion of the estimated total income from

the video game treated as earned at the end of that period.

30

(3)   

For subsequent periods of account the following are brought into

account—

(a)   

as a debit, the difference between the amount of the costs of

the video game incurred (and represented in work done) to

date and the corresponding amount for the previous period,

35

and

(b)   

as a credit, the difference between the proportion of the

estimated total income from the video game treated as earned

at the end of that period and the corresponding amount for

the previous period.

40

 
 

Finance Bill
Schedule 16 — Tax relief for video games development
Part 1 — Amendments of CTA 2009

285

 

(4)   

The proportion of the estimated total income treated as earned at the

end of a period of account is given by—equation: cross[over[char[C],char[T]],char[I]]

   

where—

C is the total to date of costs incurred (and represented in work

done),

5

T is the estimated total cost of the video game, and

I is the estimated total income from the video game.

Supplementary

1217BB  

Income from the video game

(1)   

References in this Chapter to income from the video game are to any

10

receipts by the company in connection with the production or

exploitation of the video game.

(2)   

This includes—

(a)   

receipts from the sale of the video game or rights in it,

(b)   

royalties or other payments for use of the video game or

15

aspects of it (for example, characters or music),

(c)   

payments for rights to produce games or other merchandise,

and

(d)   

receipts by the company by way of a profit share agreement.

(3)   

Receipts that (apart from this subsection) would be regarded as of a

20

capital nature are treated as being of a revenue nature.

1217BC  

Costs of the video game

(1)   

References in this Chapter to the costs of the video game are to

expenditure incurred by the company on—

(a)   

video game development activities in connection with the

25

video game, or

(b)   

activities with a view to exploiting the video game.

(2)   

This is subject to any provision of the Corporation Tax Acts

prohibiting the making of a deduction, or restricting the extent to

which a deduction is allowed, in calculating the profits of a trade.

30

(3)   

Expenditure that (apart from this subsection) would be regarded as

of a capital nature by reason only of being incurred on the creation of

an asset (the video game) is treated as being of a revenue nature.

1217BD  

When costs are taken to be incurred

(1)   

For the purposes of this Chapter costs are incurred when they are

35

represented in the state of completion of the work in progress.

(2)   

Accordingly—

(a)   

payments in advance for work to be done are ignored until

the work has been carried out, and

(b)   

deferred payments are recognised to the extent that the work

40

is represented in the state of completion.

 
 

Finance Bill
Schedule 16 — Tax relief for video games development
Part 1 — Amendments of CTA 2009

286

 

(3)   

The costs incurred on the video game are taken to include an amount

that has not been paid only if it is the subject of an unconditional

obligation to pay.

(4)   

If an obligation is linked to income being earned from the video

game, no amount is to be brought into account in respect of the costs

5

of the obligation unless an appropriate amount of income is or has

been brought into account.

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

10

reasonable basis taking into consideration all relevant circumstances.

Chapter 3

Video games tax relief

Introductory

1217C   

Availability and overview of video games tax relief

15

(1)   

This Chapter applies for corporation tax purposes to a company that

is the video games development company in relation to a video

game.

(2)   

Relief under this Chapter (“video games tax relief”) is available to the

company if the conditions specified in the following sections are met

20

in relation to the video game—

(a)   

section 1217CA (intended for supply),

(b)   

section 1217CB (British video game), and

(c)   

section 1217CE (UK expenditure).

(3)   

Video games tax relief is given by way of—

25

(a)   

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

(b)   

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

(4)   

But 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

30

Chapter 6A of Part 3 in respect of the expenditure, or

(b)   

the company has obtained relief under Part 13 (additional

relief for expenditure on research and development) in

respect of the expenditure.

(5)   

Sections 1217CK to 1217CN contain provision about unpaid costs,

35

artificially inflated claims and confidentiality of information.

(6)   

In this Chapter “the separate video game trade” means the

company’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

40

about the procedure for making claims for video games tax relief.

 
 

Finance Bill
Schedule 16 — Tax relief for video games development
Part 1 — Amendments of CTA 2009

287

 

“Intended for supply”

1217CA  

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—

5

(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

condition is not met even if that becomes the intention.

10

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)   

The Secretary of State, with the approval of the Treasury, may by

15

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”.

(3)   

Regulations under subsection (2) may—

(a)   

specify different conditions in relation to different

20

descriptions of video game,

(b)   

provide that specified descriptions of video game may not be

certified as a British video game, and

(c)   

enable the Secretary of State to direct that any provision

made by virtue of paragraph (b) does not apply to a video

25

game that meets specified conditions.

   

“Specified” means specified in the regulations.

(4)   

Regulations under subsection (2) are to be made by statutory

instrument.

(5)   

A statutory instrument containing regulations under subsection (2)

30

is subject to annulment in pursuance of a resolution of the House of

Commons.

(6)   

Sections 1217CC and 1217CD contain further provision about

certification of video games as British video games, including

provision about applications for, and withdrawal of, certification.

35

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

development company.

(2)   

The application may be for an interim or final certificate.

40

(3)   

An interim certificate is a certificate that—

(a)   

is granted before the video game is completed, and

 
 

Finance Bill
Schedule 16 — Tax relief for video games development
Part 1 — Amendments of CTA 2009

288

 

(b)   

states that the video game, if completed in accordance with

the 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

5

(b)   

states that the video game is a British video game.

(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

10

purposes 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—

15

(a)   

provision 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

20

subsection (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.

25

(9)   

A 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

30

interim 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—

35

(a)   

may 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

40

effect 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

45

may revoke its certification.

 
 

Finance Bill
Schedule 16 — Tax relief for video games development
Part 1 — Amendments of CTA 2009

289

 

(6)   

Unless the Secretary of State directs otherwise, a certificate that is

revoked is treated as never having had effect.

UK expenditure

1217CE  

UK expenditure

(1)   

At least 25% of the core expenditure on the video game incurred by

5

the company must be UK expenditure.

(2)   

The Treasury may by regulations amend the percentage specified in

subsection (1).

Additional deductions

1217CF  

Additional deduction for qualifying expenditure

10

(1)   

If video games tax relief is available to the company, it may (on

making 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.

15

(3)   

In this Chapter “qualifying expenditure” means core expenditure on

the 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—

20

(a)   

amend subsection (3), and

(b)   

provide 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

25

trade is carried on, the amount of the additional deduction is—equation: char[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.

30

(2)   

For any period of account after the first, the amount of the additional

deduction is given by—equation: plus[char[E],minus[char[P]]]

   

where—

E is—

(a)   

so much of the qualifying expenditure incurred to

35

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

previous periods.

40

 
 

Finance Bill
Schedule 16 — Tax relief for video games development
Part 1 — Amendments of CTA 2009

290

 

(3)   

The Treasury may by regulations amend this section.

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

5

surrenderable 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

10

subsections (5) and (6)).

(3)   

The company’s available loss for an accounting period is given by—equation: plus[char[L],times[char[R],char[U],char[L]]]

   

where—

L is the amount of the company’s loss for the period in the

separate video game trade, and

15

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

been—

20

(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

trade is carried on, the available qualifying expenditure is the

25

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—equation: plus[char[E],minus[char[S]]]

   

where—

30

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

1217CI(1).

(7)   

If a period of account of the separate video game trade does not

35

coincide with an accounting period, any necessary apportionments

are to be made by reference to the number of days in the periods

concerned.

1217CI  

Surrendering of loss and amount of video game tax credit

(1)   

The company may surrender the whole or part of its surrenderable

40

loss in an accounting period.

 
 

 
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