New data from HMRC underscores the importance of VGTR to the UK games industry. But with so much funding available, why are so many smaller studios still missing out?
UK games developers claimed £121 million in Video Games Tax Relief during the last financial year, according to new figures released by HMRC.
The annual Creative Industries Statistics report for the 19/20 tax year revealed funding was awarded to 350 claims, representing 605 finished and unfinished projects. This translate to an average payout of £200,000 per qualifying game. And over £345,000 per claim.
In further good news, the total relief delivery by the government (up 17%), games claimed for (13%) and the number of claims (1.5%) all increased compared to last year.
In the seven years its been running, the VGTR scheme has delivered £444 million in tax relief and cash credits to almost 1,500 claims, equating to £3.7 billion of UK investment.
At a high level, HMRC’s numbers underline the continued generosity of Video Games Tax Relief; a scheme that is increasingly important to smaller studios looking for new sources of growth funding.
But if we dig deeper into these pleasing statistics, we unearth some fascinating trends with serious implications for video games developers.
Big games dominate payouts
Despite accounting for just 13% of submissions in the 19/20 tax year, VGTR claims worth £500,000 or more accounted for 80% of the total relief distributed by the government.
Conversely, claims worth £50,000 or less received just 3% of funding while accounting for more than half of accepted filings.
This is a big difference. But what does such a large discrepancy mean for the industry?
First, it’s inevitable that big-budget games would consume the lion’s share of VGTR payouts.
Larger studios can invest significantly more in their titles. And they are generally better equipped to maximise the tax incentives available to them.
This trend isn’t exclusive to VGTR, either. We see this same pattern played out every year in R&D Tax Relief.
Small studios are still missing out
But when it comes to smaller studios, HMRC’s figures send a mixed message.
On the one hand, roughly 180 VGTR claims for the 19-20 tax year were worth £50,000 or less. That shows that many indie developers with smaller-scale projects are taking advantage of the scheme.
This is extremely good news, given that VGTR is especially beneficial to smaller studios who are looking for new sources of funding.
On the other hand, we now know that approximately 360 games companies filed a VGTR claim for the 19/20 financial year. Which is roughly 15% of the 2,300 or so studios that are currently active in the UK.
This is a far smaller proportion than we would expect, given the inclusivity of VGTR’s eligibility criteria, suggesting that many eligible developers are simply not claiming.
Why aren’t more studios claiming VGTR?
This data begs the question, why aren’t more games studios claiming the tax relief and cash credits they’re entitled to?
Judging by the companies we’ve spoken to, there are two main reasons.
First, many studios simply don’t realise they’re eligible to file a claim. Second, smaller studios struggle to find time to file.
The solution to the first problem is education. The government should do more to inform companies about the different reliefs they’re entitled to.
Companies like GrantTree have a role to play, too.
In fact, if you’re a games studio wondering whether you’re eligible for Video Games Tax Relief, or want to know more about the scheme, you can find lots of useful content in the dedicated VGTR section of our blog.
The solution to the second problem – that small studios lack the resources to file a claim – is harder to solve.
If you’re in this situation, it might be time to speak to a VGTR claim specialist.
A specialist will determine your eligibility, assemble your application, and ensure you’re claiming for every penny possible. All with minimal involvement from your team.
Interested in some outside help? Check out the five benefits of working with a VGTR claim specialist.
Questions about VGTR?
The UK video games industry has gone from strength to strength over the last few years.
And the latest figures from HMRC show that VGTR continues to be an important source of finance for growing games companies.
Still, more must be done to enable eligible studios to claim their full entitlement of relief.
If you have any questions about claiming VGTR for your studio, then just drop us a line!
Our VGTR claims experts would be happy to point you in the right direction.