Corporation Tax Act 2009

[F1 CHAPTER 3 U.K. Video games tax relief

Textual Amendments

F1 Pt. 15B inserted (17.7.2013 for specified purposes and 1.4.2014 in so far as not already in force) by Finance Act 2013 (c. 29), Sch. 17 paras. 1, 2; S.I. 2014/1962, art. 2(1)(2)

Introductory U.K.

1217C Availability and overview of video games tax relief U.K.

(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 in relation to the video game—

(a) section 1217CA (intended for supply),

(b) section 1217CB (British video game), and

(c) section 1217CE ([F2 [F3 European] expenditure]).

(3) Video games tax relief is given by way of—

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

Textual Amendments

F2 Words in s. 1217C(2)(c) substituted (with effect in accordance with s. 34(8) of the amending Act) by Finance Act 2014 (c. 26), s. 34(6)(a)

F3 Word in s. 1217C(2)(c) substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) Regulations 2019 (S.I. 2019/689), regs. 1, 16(23) (with regs. 39-41); 2020 c. 1, Sch. 5 para. 1(1)

“Intended for supply” U.K.

1217CA Intended for supply U.K.

(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—

(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.

British video games U.K.

1217CB British video game U.K.

(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 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 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 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) 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.

1217CC Applications for certification U.K.

(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.

(3) An interim certificate is a certificate that—

(a) is granted before the video game is completed, and

(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

(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 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—

(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 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.

(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 U.K.

(1) If the Secretary of State is satisfied that the requirements are met for 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—

(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 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 may revoke its certification.

(6) Unless the Secretary of State directs otherwise, a certificate that is revoked is treated as never having had effect.

[F4 EEA expenditure] U.K.

Textual Amendments

F4 S. 1217CE cross-heading substituted (with effect in accordance with s. 34(8) of the amending Act) by Finance Act 2014 (c. 26), s. 34(6)(b)

1217CE [F5 European expenditure] U.K.

(1) At least 25% of the core expenditure on the video game incurred by the company must be [F6 European expenditure].

(2) The Treasury may by regulations amend the percentage specified in subsection (1).

Textual Amendments

F5 Words in s. 1217CE heading substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) Regulations 2019 (S.I. 2019/689), regs. 1, 16(24) (with regs. 39-41); 2020 c. 1, Sch. 5 para. 1(1)

F6 Words in s. 1217CE(1) substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) Regulations 2019 (S.I. 2019/689), regs. 1, 16(24) (with regs. 39-41); 2020 c. 1, Sch. 5 para. 1(1)

Additional deductions U.K.

1217CF Additional deduction for qualifying expenditure U.K.

(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.

(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.

[F7 (3A) But if the core expenditure on the video game includes sub-contractor payments which (in total) exceed £1 million, the excess is not “qualifying expenditure”.]

(4) The Treasury may by regulations—

(a) amend [F8 subsections (3) and (3A)], and

(b) provide that expenditure of a specified description is or is not to be regarded as qualifying expenditure.

[F9 (5) In this section, “sub-contractor payment” means a payment made by the company to another person in respect of work on design, production or testing of the video game that is contracted out by the company to the person.]

Textual Amendments

F7 S. 1217CF(3A) inserted (with effect in accordance with s. 34(8) of the amending Act) by Finance Act 2014 (c. 26), s. 34(5)(a)

F8 Words in s. 1217CF(4)(a) substituted (with effect in accordance with s. 34(8) of the amending Act) by Finance Act 2014 (c. 26), s. 34(5)(b)

F9 S. 1217CF(5) inserted (with effect in accordance with s. 34(8) of the amending Act) by Finance Act 2014 (c. 26), s. 34(5)(c)

1217CG Amount of additional deduction U.K.

(1) For the first period of account during which the separate video game trade is carried on, the amount of the additional deduction is—

where E is—

a

so much of the qualifying expenditure as is [F10 European expenditure], or

b

if less, 80% of the total amount of qualifying expenditure.

(2) For any period of account after the first, the amount of the additional deduction is given by—

where—

E is—

(a)

so much of the qualifying expenditure incurred to date as is [F10 European 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.

(3) The Treasury may by regulations amend this section.

Textual Amendments

F10 Words in s. 1217CG substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) Regulations 2019 (S.I. 2019/689), regs. 1, 16(25) (with regs. 39-41); 2020 c. 1, Sch. 5 para. 1(1)

Video game tax credits U.K.

1217CH Video game tax credit claimable if company has surrenderable loss U.K.

(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 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 subsections (5) and (6)).

(3) The company's available loss for an accounting period is given by—

where—

L is the amount of the company's loss for the period in the separate video game trade, and

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—

(a) surrendered under section 1217CI(1), or

(b) carried forward under section 45 [F11 or 45B] 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 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—

where—

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 coincide with an accounting period, any necessary apportionments are to be made by reference to the number of days in the periods concerned.

Textual Amendments

F11 Words in s. 1217CH(4)(b) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 141

1217CI Surrendering of loss and amount of video game tax credit U.K.

(1) The company may surrender the whole or part of its surrenderable loss in an accounting period.

(2) If the company surrenders the whole or part of that loss, the amount of the video game tax credit to which it is entitled for the accounting period is 25% of the amount of the loss surrendered.

(3) The company's available loss for the accounting period is reduced by the amount surrendered.

1217CJ Payment in respect of video game tax credit U.K.

(1) If the company—

(a) is entitled to a video game tax credit for a period, and

(b) makes a claim,

the Commissioners for Her Majesty's Revenue and Customs (“the Commissioners”) must pay to the company the amount of the credit.

(2) An amount payable in respect of—

(a) a video game tax credit, or

(b) interest on a video game tax credit under section 826 of ICTA,

may be applied in discharging any liability of the company to pay corporation tax.

To the extent that it is so applied the Commissioners' liability under subsection (1) is discharged.

(3) If the company's company tax return for the accounting period is enquired into by the Commissioners, no payment in respect of a video game tax credit for that period need be made before the Commissioners' enquiries are completed (see paragraph 32 of Schedule 18 to FA 1998).

In those circumstances the Commissioners may make a payment on a provisional basis of such amount as they consider appropriate.

(4) No payment need be made in respect of a video game tax credit for an accounting period before the company has paid to the Commissioners any amount that it is required to pay for payment periods ending in that accounting period—

(a) under PAYE regulations,

(b) under section 966 of ITA 2007 (visiting performers), or

(c) in respect of Class 1 national insurance contributions under Part 1 of the Social Security Contributions and Benefits Act 1992 or Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992.

(5) A payment in respect of a video game tax credit is not income of the company for any tax purpose.

Miscellaneous U.K.

1217CK No account to be taken of amount if unpaid U.K.

(1) In determining for the purposes of this Chapter the amount of costs incurred on a video game at the end of a period of account, ignore any amount that has not been paid 4 months after the end of that period.

(2) This is without prejudice to the operation of section 1217BD (when costs are taken to be incurred).

1217CL Artificially inflated claims for additional deduction or tax credit U.K.

(1) So far as a transaction is attributable to arrangements entered into wholly or mainly for a disqualifying purpose, it is to be ignored in determining for any period—

(a) any additional deduction which a company may make under this Chapter, and

(b) any video game tax credit to be given to a company.

(2) Arrangements are entered into wholly or mainly for a disqualifying purpose if their main object, or one of their main objects, is to enable a company to obtain—

(a) an additional deduction under this Chapter to which it would not otherwise be entitled or of a greater amount than that to which it would otherwise be entitled, or

(b) a video game tax credit to which it would not otherwise be entitled or of a greater amount than that to which it would otherwise be entitled.

(3) “Arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.

Modifications etc. (not altering text)

C1 S. 1217CL(1)(a) modified by 2010 c. 4, s. 357TE (as inserted (with effect in accordance with s. 5 of the amending Act) by Corporation Tax (Northern Ireland) Act 2015 (c. 21), s. 1)

C2 S. 1217CL(2)(a) modified by 2010 c. 4, s. 357TE (as inserted (with effect in accordance with s. 5 of the amending Act) by Corporation Tax (Northern Ireland) Act 2015 (c. 21), s. 1)

1217CM Confidentiality of information U.K.

(1) Section 18(1) of the Commissioners for Revenue and Customs Act 2005 (restriction on disclosure by Revenue and Customs officials) does not prevent disclosure to the Secretary of State for the purposes of the Secretary of State's functions under any of the provisions listed in subsection (2).

(2) The provisions referred to in subsection (1) are—

(a) sections 1216CB to 1216CD (certification of relevant programmes as British),

(b) sections 1217CB to 1217CD (certification of video games as British), and

(c) Schedule 1 to the Films Act 1985 (certification of films as British).

(3) Information so disclosed may be disclosed to the British Film Institute.

(4) The Treasury may by order amend subsection (3)—

(a) so as to substitute for the person or body specified in that subsection a different person or body, or

(b) in consequence of a change in the name of the person or body so specified.

(5) A person to whom information is disclosed under subsection (1) or (3) may not otherwise disclose it except—

(a) for the purposes of the Secretary of State's functions under any of the provisions listed in subsection (2),

(b) if the disclosure is authorised by an enactment,

(c) in pursuance of an order of a court,

(d) for the purposes of a criminal investigation or legal proceedings (whether civil or criminal) connected with the operation of any of Parts 15 to 15B of this Act or Schedule 1 to the Films Act 1985,

(e) with the consent of the Commissioners for Her Majesty's Revenue and Customs, or

(f) with the consent of each person to whom the information relates.

1217CN Wrongful disclosure U.K.

(1) A person (“X”) commits an offence if—

(a) X discloses revenue and customs information relating to a person (as defined in section 19(2) of the Commissioners for Revenue and Customs Act 2005),

(b) the identity of the person to whom the information relates is specified in the disclosure or can be deduced from it, and

(c) the disclosure contravenes section 1217CM(5).

(2) If a person (“Y”) is charged with an offence under subsection (1), it is a defence for Y to prove that Y reasonably believed—

(a) that the disclosure was lawful, or

(b) that the information had already and lawfully been made available to the public.

(3) A person guilty of an offence under subsection (1) is liable—

(a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine or both, or

(b) on summary conviction, to imprisonment for a term not exceeding 12 months or a fine not exceeding the statutory maximum or both.

[F12 (3A) In the application of this section in England and Wales, the reference in subsection (3)(b) to 12 months is to be read as a reference to the general limit in a magistrates’ court (or to 6 months in relation to an offence committed before 2 May 2022).]

(4) A prosecution for an offence under subsection (1) may be brought in England and Wales [F13 only by or with the consent of the Director of Public Prosecutions.]

(5) A prosecution for an offence under subsection (1) may be brought in Northern Ireland only—

(a) by the Commissioners for Her Majesty's Revenue and Customs, or

(b) with the consent of the Director of Public Prosecutions for Northern Ireland.

(6) In the application of this section—

F14 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) in Northern Ireland,

the reference in subsection (3)(b) to 12 months is to be read as a reference to 6 months.]

Textual Amendments

F12 S. 1217CN(3A) inserted by The Judicial Review and Courts Act 2022 (Magistrates’ Court Sentencing Powers) Regulations 2023 (S.I. 2023/149), regs. 1(2), 20(4)(a) (as amended (18.10.2023) by S.I. 2023/1108, regs. 1(2), 3(2))

F13 Words in s. 1217CN(4) substituted (27.3.2014) by The Public Bodies (Merger of the Director of Public Prosecutions and the Director of Revenue and Customs Prosecutions) Order 2014 (S.I. 2014/834), art. 1(1), Sch. 2 para. 64

F14 S. 1217CN(6)(a) omitted (7.2.2023 at 12.00 p.m.) by virtue of The Judicial Review and Courts Act 2022 (Magistrates’ Court Sentencing Powers) Regulations 2023 (S.I. 2023/149), regs. 1(2), 20(4)(b)