You are here

Focus on... Tax Relief for the UK’s Creative Sector

27 March 2019

Companies that predominantly work within film, television animation, high-end television, children’s television and games development may be eligible for tax relief. The following article first appeared on Immerse UK and has been reproduced with the kind permission of Sheridans, REWIND and Immerse UK – the original feature focused on Video Games Tax Relief and Animation Television Tax Relief, but has been edited to focus solely on the former. 

Your First Game panel at Guru Live 2018

There is a wealth of world-class production, development, design talent and resources within the UK, making it both a hub and go-to destination for content development across multiple formats.

One facet of this growth has been within the immersive tech sector, especially for those entities catering to brands looking to widen their audience engagement through the commissioning and creation of branded immersive experiences. This investment and spend has led to a significant increase in the number of companies looking to create immersive content and, correspondingly, an increase in the number of new entities that are establishing themselves within this sector or looking to transition their business model. The majority of these entities still work to the traditional ‘work for hire’ model, moving from project to project.

However, what many of these entities do not realise is that some of their projects may be eligible for one of the UK’s Creative Sector Tax Relief schemes. These schemes are available to companies that predominantly work within film, animation television, high-end television, children’s television and game development and, more recently, orchestra, theatre, museums and galleries. This article focuses on Video Games Tax Relief (VGTR) and its application with the immersive tech sector.

Over the last few years, the creation of 360-degree video and interactive VR has surged, thanks in part to the advance in technology, but also to the increasing appetite for new forms of content creation. Immerse UK recently commissioned a first of its kind report on the UK immersive industry, and the findings show that the UK is emerging as a world leader in this sector. There are now around 1,000 immersive specialist companies in the UK, employing approximately 4,500 people, representing nine per cent of the global market. Predictions from AR/VR/XR advisors Digi-Capital that the AR market could hit $70-75 billion and the VR market $10-15 billion by 2023 [figures updated from original article – ed.] show the potential of these new mediums.


There is a common misconception that these reliefs are the same as Research and Development (R&D) tax credits, but in fact they are not, and in most circumstances are more advantageous. These tax relief schemes do not have complicated application processes, with an opportunity to claim up to 25 per cent of UK core expenditure (on a maximum of 80 per cent of the total if all UK spend) back as a tax relief, and in certain circumstances as a cash payment from HMRC, the time can be seen as being well spent.

Unlike R&D credits, the VGTR scheme operates by assessing each project individually, with the Certification Unit at the British Film Institute (BFI) acting as the gateway to qualification for the tax reliefs. Here are some key aspects to consider:

  • Can the project be considered a game? There will be an expected level of interactivity and gameplay elements, which we discuss further below.
  • Is it intended for supply?
  • Is there a games development company responsible for making the game from pre-development through to completion?

In assessing whether a project can be considered for VGTR relief, the BFI will review whether the content can be considered to be a game. As this assessment is undertaken on a project-by-project basis, it is difficult to set out a clear set of parameters for which a project must meet in order to be considered interactive.

However, it is clear that a project must go beyond being a mere 360-degree video and instead involve some elements of traditional gameplay, ie some form of interaction with the content and feedback. One example of this would be a user interacting with a virtual storybook, where the actions and choices the user makes within the game directly influences and changes the outcome, or a user interacting with a virtual museum and subsequently gaining points for the number of exhibits they find and view.

However, certain games could also be deemed ineligible if it appears they are produced for the intention of gambling and offer a prize (money or money’s worth), for example, through a game of chance.

Testing out VR at the Visioning the New Realities event at Cardiff's Millennium Centre, 2017

The Cultural Test

In order to qualify for VGTR the content must pass a Cultural Test that certifies the project as British. This test is administered by the BFI Certification Unit using a point based system, which requires the project to gain 16 out of 31 points in order to pass. Each piece of content is individually assessed and can potentially gain points from a range of cultural attributes, including:

  • being set in the UK/European Economic Area (EEA) or undetermined locations;
  • containing UK/EEA or undetermined citizens or residents;
  • containing English language or demonstrating British creativity, British heritage and/or diversity;
  • production or development activity being undertaken in the UK, and key personnel being citizens or residents in the EEA.

The threshold for gaining the points is relatively low, and so many projects have the potential to pass the games cultural test and qualify as British.

Sol Rogers, CEO of REWIND, chair of Immerse UK and the BAFTA Immersive Entertainment Advisory Group, says: “It’s fantastic that these schemes are available to the UK immersive industry, it will help us keep ahead of the international competition. The openness of the BFI Certification Unit and HMRC to acknowledge and respect this new immersive industry, and the flexibility of the schemes, is a huge plus and provides the support the industry needs to continue to progress.”

In addition these schemes are designed to encourage and support the investment and growth of talent within the UK creative sectors. A lack of talent is one of the biggest barriers to growth at the moment.

Rogers concludes: “Regardless of what platform a company develops for, I urge them to start looking at whether or not they have projects which could qualify. These schemes are in place to support British developers and the financial benefits to smaller businesses can have a big impact.”

For further information, contact the BFI Certification Unit and BFI website for helpful guidance on how to get started with the process. Sheridans can also help advise on the process and are working with a number of clients to help them take advantage of these reliefs.

The full unedited article can be read here.