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Finance (No. 2) Bill Continued

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

(a)	set against other 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,

is restricted to the amount (if any) that is not attributable to video game

tax relief (see subsection (6)).

(6)	The amount of a loss in any period that is attributable to video game

tax relief is calculated by deducting from the total amount of the loss

the 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 1216Z.

1216Z

Terminal losses

(1)	This section applies if—

(a)	a company (“company A”) is the video game production

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 1216H), and

(c)	if 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)	is the video game production 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)	The election is to have the terminal loss (or 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 of the first accounting period beginning

after the cessation and so on.

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

(a)	there is another company (“company B”) that is the video

game production 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)	company 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

treated 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 beginning after the cessation and so on.

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Finance (No. 2) Bill Continued

(7)	The Treasury may, in relation to the surrender of a loss under

subsection (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 made

by Part 8 of Schedule 18 to FA 1998 (company tax returns: claims for

group relief).

(8)	“Qualifying video game” means a video game in relation to which the

conditions for video game tax relief are met (see section 1216O(2)).

Chapter 5

Provisional Entitlement to Relief

1216AA

Introduction

(1)	In this Chapter—

“the company” means the video game production company in relation to

a video game,

“the completion period” means the accounting period of the company—

(a)	in which the video game is completed, or

(b)	if the company does not complete the video game, in which it

abandons video game-making activities in relation to it,

“interim accounting period” means any earlier accounting period of the

company during which video game-making activities are carried on in

relation to the video game,

“the separate video game trade” means the company’s separate trade in

relation to the video game (see section 1216H), and

“special video game relief” means—

(a)	video game tax relief, or

(b)	relief under section 1216Z (transfer of terminal losses from one

qualifying video game to another).

(2)	The company’s company tax return for the completion period must

state that the video game has been completed or that the company has

abandoned video game-making activities in relation to it (as the case

may be).

1216AB

The UK expenditure condition

(1)	The company is not entitled to special video game relief for an interim

accounting period unless—

(a)	its company tax return for the period states the amount of

planned core expenditure on the video game that is UK

expenditure, and

(b)	that amount is such as to indicate that the condition in section

1216R (the UK expenditure condition) will be met on

completion of the video game.

If those requirements are met, the company is provisionally treated in

relation to that period as if that condition was met.

(2)	If such a statement is made but it subsequently appears that the

condition will not be met on completion of the video game, the

company—

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Finance (No. 2) Bill Continued

(a)	is not entitled to special video game relief for any period for

which its entitlement depended on such a statement, and

(b)	must amend accordingly its company tax return for any such

period.

(3)	When the video game is completed or the company abandons video

game-making activities in relation to it (as the case may be), the

company’s company tax return for the completion period must be

accompanied by a final statement of the amount of the core

expenditure on the video game that is UK expenditure.

(4)	If that statement shows that the condition in section 1216R is not met,

the company—

(a)	is not entitled to special video game relief for any period, and

(b)	must amend accordingly its company tax return for any period

for which such relief was claimed.

1216AC

Video game tax relief on basis that video game is limited-budget

                video game

(1)	The company is not entitled to video game tax relief for an interim

accounting period on the basis that the video game is a limited-budget

video game unless—

(a)	its company tax return for the period states the amount of

planned core expenditure on the video game, and

(b)	that amount is such as to indicate that the condition in section

1216E(2) (definition of “limited-budget video game”) will be

met on completion of the video game.

In that case, the video game is provisionally treated in relation to that

period as if that condition was met.

(2)	If it subsequently appears that the condition will not be met on

completion of the video game, the company—

(a)	is not entitled to video game tax relief for any period on the

basis that the video game is a limited-budget video game, and

(b)	must amend accordingly its company tax return for any such

period for which such relief has been claimed on that basis.

(3)	When the video game is completed or the company abandons video

game-making activities in relation to it (as the case may be), the

company’s company tax return for the completion period must be

accompanied by a final statement of the core expenditure on the video

game.

(4)	Subsection (5) applies if that statement shows—

(a)	that the video game is not a limited-budget video game, or (as

the case may be)

(b)	that, having regard to the proportion of work on the video

game that was completed, the video game would not have

been a limited-budget video game had it been completed.

(5)	The company—

(a)	is not entitled to video game tax relief for any period on the

basis that the video game is a limited-budget video game, and

(b)	must amend accordingly its company tax return for any period

for which such relief was claimed on that basis.

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1216AD

Time limit for amendments and assessments

Any amendment or assessment necessary to give effect to the

provisions of this Chapter may be made despite any limitation on the

time within which an amendment or assessment may normally be

made.”.

2	In Part 9D of Schedule 18 to the Finance Act 1998, references to film should

also include references to video game.’.

NOTICES WITHDRAWN

The following Notices have been withdrawn:

Mr David Hanson

Kerry McCarthy

Chris Leslie

NS1

To move the following Schedule:—

‘Video Game Production

3	After section 1216 of CTA 2009, insert—

“Part 15A

Video Game Production

Chapter 6

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

(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—

(a)	by way of additional deductions to be made in calculating the

profits or losses of the company’s separate trade, or

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Finance (No. 2) Bill Continued

(b)	by way of a payment (a “video game tax credit”) to be made

on the company’s surrender of losses from that 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 decription 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.

(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—

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(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.

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.

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(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 7

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

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.

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Revised 5 November 2010