Corporation Tax Act 2009

[F1 Chapter 5 U.K. Video games

Textual Amendments

F1 Pt. 14A inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 2 para. 1 (with Sch. 2 paras. 16(1), 17-25)

General U.K.

1179F Application of Chapters 2 and 3 to video games U.K.

(1) For the purposes of this Part—

(a) a qualifying video game (see section 1179FA) is a qualifying production, and

(b) the development company for a qualifying video game (see section 1179FI) is the qualifying company for that video game.

(2) The following provisions of this Chapter apply for the purposes of this Part in relation to video games.

(3) Expenditure credit under Chapter 3 is called “video game expenditure credit” when the entitlement to it arises in respect of a video game.

Qualifying video games U.K.

1179FA Video games that are qualifying video games U.K.

(1) A video game is a qualifying video game if—

(a) it is not an excluded game (see subsection (2)),

(b) it meets the intended supply condition (see section 1179FB),

(c) it meets the British certification condition (see section 1179FC), and

(d) it meets the UK expenditure condition (see section 1179FH).

(2) A video game is an excluded game if it is produced for—

(a) advertising or promotional purposes, or

(b) the purposes of gambling, within the meaning of the Gambling Act 2005.

1179FB Intended supply condition U.K.

(1) A video game meets the intended supply condition if it is intended for supply to the general public.

(2) If the video game does not meet that condition in an accounting period after the opt-in period, it cannot meet it in any subsequent accounting period.

British certification condition U.K.

1179FC British certification condition: provisional and final satisfaction U.K.

(1) In this section, references to a certificate are to a certificate under section 1179FF.

(2) A video game meets the British certification condition in a pre-completion period (see section 1179FQ) if—

(a) an interim certificate has effect in relation to it at the end of that period, and

(b) the development company’s company tax return for that period is accompanied by the certificate.

(3) A video game meets the British certification condition in the completion period (see section 1179FQ) and any subsequent accounting period if—

(a) at the end of the completion period, either—

(i) a final certificate has effect in relation to the video game, or

(ii) the development company has abandoned development activities in relation to the video game and an interim certificate has effect in relation to it, and

(b) the development company’s company tax return for that period is accompanied by the certificate.

(4) Subsections (2) and (3) are subject to subsections (5) and (6).

(5) If a video game does not meet the British certification condition in the completion period, it is no longer to be regarded as having done so (nor, therefore, as being a qualifying video game) in any pre-completion period.

(6) If, after the end of an accounting period, a certificate ceases to have effect in respect of that period, the video game in question is no longer to be regarded as having met the British certification condition (nor, therefore, as being a qualifying video game) in that period in reliance on that certificate.

(7) Subsection (6) does not apply where an interim certificate ceases to have effect on being superseded by a final certificate.

(8) For the purposes of subsection (6), a certificate that ceases to have effect so ceases in respect of all accounting periods, except to the extent that a direction under section 1179FF provides otherwise.

1179FD Test for certification U.K.

(1) 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.

(2) Such regulations may—

(a) specify different conditions in relation to different descriptions of video game;

(b) provide that certain descriptions of video game may not be certified as a British video game;

(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 certain conditions.

1179FE Applications for certification U.K.

(1) The development company for a video game may apply to the Secretary of State for a certificate under section 1179FF in relation to the programme.

(2) An application may be for an interim certificate or a final certificate.

(3) An interim certificate is a certificate that—

(a) is granted before the video game is completed (see section 1179FS), 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 Secretary of State may require an applicant to provide documents or information to assist the Secretary of State in determining the application.

(6) The Secretary of State may require information provided for the purposes of an 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 any conditions that apply by virtue of section 1179FD, 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.

1179FF Certification and revocation U.K.

(1) If—

(a) an application is made in accordance with section 1179FE, and

(b) the Secretary of State is satisfied that the video game concerned meets any conditions that apply by virtue of section 1179FD,

the Secretary of State must certify the video game accordingly.

(2) 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.

(3) If it appears to the Secretary of State that a video game certified under this section ought not to have been certified, the Secretary of State may revoke the certificate.

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

1179FG Disclosure of information for certification purposes U.K.

Section 1179DN (disapplication of section 18, and application of section 19, of the Commissioners for Revenue and Customs Act 2005) has effect in relation to the Secretary of State’s functions under sections 1179FD to 1179FF as it has effect in relation to the Secretary of State’s functions under sections 1179DK to 1179DM.

UK expenditure condition U.K.

1179FH UK expenditure condition U.K.

(1) A video game meets the UK expenditure condition in a pre-completion period (see section 1179FQ) if—

(a) the development company’s company tax return for the period states—

(i) the total amount of core expenditure that is expected to be incurred in relation to the video game, and

(ii) the amount of that expenditure that is expected to be UK expenditure, and

(b) the second of those amounts is at least 10% of the first.

(2) A video game meets the UK expenditure condition in the completion period (see section 1179FQ) and any subsequent accounting period if—

(a) the development company’s company tax return for the completion period states—

(i) the total amount of core expenditure that has been incurred in relation to the video game, and

(ii) the amount of that expenditure that is UK expenditure, and

(b) the second of those amounts is at least 10% of the first.

(3) Subsection (1) is subject to subsections (4) and (5).

(4) If a video game does not meet the UK expenditure condition in a pre-completion period, it is no longer to be regarded as having done so (nor, therefore, as being a qualifying video game) in any previous accounting period by virtue of subsection (1) as it applies to that previous period.

(5) If a video game does not meet the UK expenditure condition in the completion period, it is no longer to be regarded as having done so (nor, therefore, as being a qualifying video game) in any pre-completion period.

(6) References in this section to core expenditure are to core expenditure incurred by the development company.

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

Development companies U.K.

1179FI Meaning of “development company” U.K.

(1) A company is the development company for a video game if—

(a) it is responsible for designing, producing and testing the video game,

(b) it is actively engaged in planning and decision-making during the design, production and testing of the video game,

(c) it directly negotiates, contracts and pays for rights, goods and services in relation to the video game, and

(d) it is more directly engaged in the matters described in paragraphs (a) to (c), taken as a whole, than any other company that satisfies those paragraphs.

(2) Activities carried on in partnership are to be ignored in determining whether a company is the development company for a video game.

Qualifying expenditure and rate of credit U.K.

1179FJ Expenditure that qualifies for credit U.K.

Expenditure incurred by the development company for a video game counts as “relevant production expenditure” for the purposes of section 1179CA(2) if—

(a) it is core expenditure in relation to that video game (see section 1179FK), and

(b) it is not excluded expenditure (see sections 1179FL and 1179FM).

1179FK Meaning of “core expenditure” U.K.

(1) Expenditure is “core expenditure” in relation to a video game if it is expenditure on designing, producing or testing the video game.

(2) But core expenditure does not include expenditure on—

(a) designing the initial concept for a video game, or

(b) debugging, or carrying out maintenance in connection with, a completed video game.

1179FL Excluded expenditure: research and development U.K.

Expenditure is excluded expenditure to the extent that the development company would, in respect of the expenditure, be able to claim—

(a) an R&D expenditure credit under Chapter 6A of Part 3, or

(b) relief under Part 13 (relief in respect of expenditure on research and development).

1179FM Excluded expenditure: non-arm’s-length dealings with connected parties U.K.

(1) Expenditure is excluded expenditure to the extent that it represents connected party profit, unless subsection (3) applies.

(2) For the purposes of subsection (1), expenditure represents connected party profit—

(a) if it is a payment to a person (“C”) in exchange for something supplied by that person,

(b) if the development company is connected with C, and

(c) if, and to the extent that, the amount of the payment exceeds the expenditure incurred by C in supplying that thing.

(3) This subsection applies if the amount of the payment is no more than would have been the case had the transaction been entered into at arm’s length.

(4) A transaction would have been entered into “at arm’s length” if it made “the arm’s length provision” within the meaning of Part 4 of TIOPA 2010 (and for this purpose any limitation on the application of that Part is to be disregarded).

(5) Subsections (6) and (7) apply if—

(a) the supply by C to the development company is one of a sequence of transactions in which the thing supplied has been supplied by one person to another, and

(b) either—

(i) each transacting party in the sequence is connected to at least one other transacting party in the sequence, or

(ii) each transaction in the sequence is entered into in furtherance of a single scheme or arrangement (of whatever kind, and whether or not legally enforceable).

(6) The reference to C in subsection (2)(c) is to be read as a reference to the supplier in the first transaction in the sequence.

(7) The reference to the transaction in subsection (3) is to be read as including each transaction in the sequence.

(8) In this section, “payment” includes any transfer of value.

1179FN Percentage of qualifying expenditure translated into credit U.K.

(1) In relation to a qualifying video game, the relevant percentage for the purposes of step 5 in section 1179CA(1) is 34%.

(2) The Treasury may by regulations replace the percentage for the time being specified in subsection (1) with a different percentage.

Accounting for the separate trade U.K.

1179FO When the separate trade begins U.K.

For the purposes of section 1179B, the development company for a video game is treated as beginning the separate production trade in respect of the video game—

(a) when the design of the video game begins,

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

1179FP Costs and income of separate trade U.K.

(1) This section applies for the purposes of section 1179BB as that section applies in relation to a video game.

(2) Expenditure counts towards the costs of the video game if it is expenditure on—

(a) development activities in connection with the video game, or

(b) activities with a view to exploiting the video game.

(3) But an amount that has not been paid within the period of 4 months beginning with the first day after the final day of a period of account is not to count towards the costs incurred in that period.

(4) Receipts count towards the income from the video game if they are receipts in connection with the production or exploitation of the video game, including—

(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 way of a profit share agreement.

1179FQ Accounting periods U.K.

(1) A reference to an accounting period, in relation to a video game, is a reference to an accounting period of the development company for the video game.

(2) A reference to the “completion period”, in relation to a video game, is a reference to the accounting period in which—

(a) the video game is completed (see section 1179FS), or

(b) the development company abandons development activities in relation to the video game.

(3) The development company for a video game must, in its company tax return for the completion period, state whichever of those has occurred.

(4) A reference to a “pre-completion period”, in relation to a video game, is a reference to any accounting period before the completion period in relation to that video game.

(5) In this section, “development company” includes a company that is no longer the development company for the video game but is still carrying on the separate production trade in relation to it.

Miscellaneous U.K.

1179FR Meaning of “development activities” U.K.

“Development activities”, in relation to a video game, means the activities involved in designing, producing and testing the video game.

1179FS When video game is completed U.K.

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 made and made available to the general public.]