1083

House of Commons

Notices of Amendments

given on

Wednesday 3 November 2010

For other Amendment(s) see the following page(s) of Supplement to Votes:

1063-78 and 1079-80

Consideration of Bill

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Finance (No. 2) Bill, As Amended

Mr David Hanson

Kerry McCarthy

Chris Leslie

NS2

To move the following Schedule:—

‘Video Game Production

1	After section 1216 of CTA 2009, insert—

“Part 15A

Video Game Production

Chapter 1

Introduction

Introductory

1216A

Overview of Part

(1)	This Part is about video game production.

(2)	Sections 1216B to 1216G contain definitions and other provisions

about interpretation that apply for the purposes of this Part. See, in

particular, section 1216C which explains how a company comes to be

treated as the video game production company in relation to a video

game.

(3)	Chapter 2 is about the taxation of the activities of a video game

production company and includes—

(a)	provision for the company’s activities in relation to its video

game to be treated as a separate trade, and

Notices of Amendments: 3 November 2010

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Finance (No. 2) Bill Continued

(b)	provision about the calculation of the profits and losses of that

trade.

(4)	Chapter 3 is about relief (called “video game tax relief”) which can be

given to a video game production company by way of additional

deductions to be made in calculating the profits or losses of the

company’s separate trade.

(5)	Chapter 4 is about the relief which can be given for losses made by a

video game production company in its separate trade including

provision for certain such losses to be transferred to other separate

trades.

(6)	Chapter 5 provides—

(a)	for relief under Chapters 3 and 4 to be given on a provisional

basis, and

(b)	for such relief to be withdrawn if it turns out that conditions

that must be met for such relief to be given are not actually

met.

Interpretation

1216B

“Video Game” etc

(1)	This section applies for the purposes of this Part.

(2)	“Video Game” includes a game played by electronically manipulating

images produced by a computer program on a display screen.

(3)	A video game is completed when it is first in a form in which it can

reasonably be regarded as ready for copies of it to be distributed to the

general public.

1216C

“Video game production company”

(1)	For the purposes of this Part “video game production company” is to

be read in accordance with this section.

(2)	There cannot be more than one video game production company in

relation to a video game.

(3)	A company that (otherwise than in partnership)—

(a)	is responsible—

(i)	for design, programming and production of the video

game, and

(ii)	for delivery of the completed video game,

(b)	is actively engaged in production planning and decision-

making during design and programming, and

(c)	directly negotiates, contracts and pays for rights, goods and

services in relation to the video game,

is the video game production company in relation to the video game.

(4)	If there is more than one company meeting the description in

subsection (3), the company that is most directly engaged in the

activities referred to in that subsection is the video game production

company in relation to the video game.

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Finance (No. 2) Bill Continued

(5)	If there is no company meeting the description in subsection (3), there

is no video game production company in relation to the video game.

(6)	A company may elect to be regarded as a company which does not

meet the description in subsection (3).

(7)	The election—

(a)	must be made by the company by being included in its

company tax return for an accounting period (and may be

included in the return originally made or by amendment), and

(b)	may be withdrawn by the company only by amending its

company tax return for that accounting period.

(8)	The election has effect in relation to video games which commence

design in that or any subsequent accounting period.

1216D

“Video game-making activities” etc

(1)	In this Part “video game-making activities”, in relation to a video

game, means the activities involved in design, programming and

production of the video game.

(2)	The Treasury may make regulations to—

(a)	amend subsection (1),

(b)	provide that specified activities are or are not to be regarded

as video game-making activities or as video game-making

activities of a particular description, and

(c)	provide that, in relation to a specified description of video

game, references to video game-making activities of a

particular description are to be read as references to such

activities as may be specified.

“Specified” means specified in the regulations.

1216E

“Production expenditure”, “core expenditure” and “limited-budget

            video game”

(1)	In this Part, in relation to a video game—

“production expenditure” means expenditure on video game-making

activities in connection with the video game, and

“core expenditure” means the total costs that relate specifically to the

producing and developing of the video game up to the point of

commercial release.

(2)	For the purposes of this Part a “limited-budget video game” is a video

game whose core expenditure is £3 million or less.

(3)	In determining if a video game is a limited-budget video game, any

core expenditure that—

(a)	is incurred by a person under or as a result of a transaction

entered into directly or indirectly between that person and a

connected person, and

(b)	might have been expected to have been of a greater amount

(“the arm’s length amount”) if the transaction had been

between independent persons dealing at arm’s length, is

treated as having been of an amount equal to the arm’s length

amount.

Notices of Amendments: 3 November 2010

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Finance (No. 2) Bill Continued

1216F

“UK expenditure” etc

(1)	In this Part “UK expenditure”, in relation to a video game, means

expenditure on goods or services that are used or consumed in the

United Kingdom.

(2)	Any apportionment of expenditure as between UK expenditure and

non-UK expenditure for the purposes of this Part is to be made on a

just and reasonable basis.

(3)	The Treasury may by regulations amend subsection (1).

1216G

“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 Game Production Company

Separate video game trade

1216H

Activities of video game production company treated as a separate

            trade

(1)	This Chapter applies for corporation tax purposes to a company that is

the video game production company in relation to a video 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

trade”.

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

game trade—

(a)	when design begins, or

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

by the company.

1216I

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

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.

(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

Notices of Amendments: 3 November 2010

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Finance (No. 2) Bill Continued

date and the corresponding amount for the previous period,

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.

(4)	The proportion of the estimated total income treated as earned at the

end of a period of account is given by— C / T x I

where—

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

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

I is the estimated total income from the video game.

Supplementary

1216J

Income from the video game

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

receipts by the company in connection with the making 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

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

capital nature are treated as being of a revenue nature.

1216K

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-making activities in connection with the 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.

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

a capital nature only because it is incurred on the creation of an asset

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

1216L

When costs are taken to be incurred

(1)	For the purposes of this Chapter costs are incurred when they are

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

(2)	Accordingly—

(a)	payments in advance of work to be done are ignored until the

work has been carried out, and

Notices of Amendments: 3 November 2010

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Finance (No. 2) Bill Continued

(b)	deferred payments are recognised to the extent that the work

is represented in the state of completion.

(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 of the

obligation unless an appropriate amount of income is or has been

brought into account.

1216M

Pre-trading expenditure

(1)	This section applies if, before the company began to carry on the

separate video game trade, it incurred expenditure on development of

the video game.

(2)	The expenditure may be treated as expenditure of the separate video

game trade and as if incurred immediately after the company began to

carry on that trade.

(3)	If expenditure so treated has previously been taken into account for

other tax purposes, the company must amend any relevant company

tax return accordingly.

(4)	Any amendment or assessment necessary to give effect to subsection

(3) may be made despite any limitation on the time within which an

amendment or assessment may normally be made.

1216N

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

Video Game Tax Relief

Introductory

1216O

Availability and overview of video game tax relief

(1)	This Chapter applies for corporation tax purposes to a company that is

the video game production company in relation to a video game.

(2)	Relief under this Chapter (“video game 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 1216P (intended for commercial release),

(b)	section 1216Q (British video game), and

(c)	section 1216R (UK expenditure).

(3)	Video game tax relief is given by way of additional deductions (see

sections 1216S and 1216T).

(4)	Section 1216U contains provision about unpaid costs and artificially

inflated claims.

Notices of Amendments: 3 November 2010

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Finance (No. 2) Bill Continued

(5)	In this Chapter “the separate video game trade” means the company’s

separate trade in relation to the video game (see section 1216H).

(6)	See Schedule 18 to FA 1998 (in particular, Part 9D) for information

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

Conditions of relief

1216P

Intended commercial release

(1)	The video game must be intended for commercial release.

(2)	For this purpose—

(a)	“commercial release” means distribution to the paying public,

and

(b)	a video game is not regarded as intended for commercial

release unless it is intended that a significant proportion of the

earnings from the video game should be obtained by such

distribution.

(3)	Whether this condition is met is determined for each accounting

period of the company during which video game-making activities are

carried on in relation to the video game, in accordance with the

following rules.

(4)	If at the end of an accounting period the video game is intended for

commercial release, the condition is treated as having been met

throughout that period (subject to subsection (5)(b)).

(5)	If at the end of an accounting period the video game is not intended for

commercial release, the condition—

(a)	is treated as having been not met throughout that period, and

(b)	cannot be met in any subsequent accounting period.

This does not affect any entitlement of the company to relief in an

earlier accounting period for which the condition was met.

1216Q

British video game

(1)	Subject to subsection (2), a video game is a British video game for the

purposes of this Part if it achieves a minimum of 19 points out of a

maximum of 37 from the following table, with a minimum of 9 points

being obtained in sections A and B:

	A	Cultural Content	Number of points
	A1	The video game is based on locations in Europe (including	From 0 to 4 points
		fictionalised versions of locations in Europe) or on peoples
		of Europe.
	A2	The video game is inspired by or based upon: (i) European	From 0 to 4 points
		underlying material (such as a film, a book or artistic work;
		or (ii) a sport (or sports) that originated in Europe or (iii)
		an event (or events) held (or previously held) within
		Europe; or (iv) any other European subject matter.
	A3	The in-video game dialogue and in-video game text is	2 points
		mainly in the English language.
	B	Cultural Contribution
	B1	The video game is an original video game (as opposed to	3 points
		being a sequel to a previous video game).
	B2	The video game is based on or strongly features a narrative	From 0 to 4 points
		(as opposed to being a purely abstract or non-linear video
		game).
	B3	The video game incorporates any clear technical or	From 0 to 4 points
		creative innovations such as innovations in: (i) gameplay;
		(ii) graphics; (iii) user interface; (iv) artificial intelligence,
		audio or physics; or (v) online or multiplayer functionality.
	B4	The video game represents or reflects: (i) diverse European	From 0 to 4 points
		culture; or (ii) European heritage; or (iii) European
		creativity.
	C	Cultural Hubs
	C1	At least 50 per cent. of the production budget in incurred	From 0 to 4 points
		within the UK.
	C2	The in-video game text is translated into at least two other	2 points
		official languages of the EEA.
	D	Cultural Practitioners
	D1	Executive Producer.	1 point
	D2	Lead Programmer.	1 point
	D3	Lead Artist.	1 point
	D4	Scriptwriter.	1 point
	D5	Lead Designer.	1 point
	D6	Lead music and audio composer.	1 point
		Total Achievable Points	37 points

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Revised 4 November 2010