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The new Video Games Expenditure Credit and the Spring Budget – what you need to know

Yesterday, the Chancellor Jeremy Hunt announced a significant set of changes to the way in which Video Games Companies can claim tax relief.  

Jeremy Hunt announced that the Video Games Tax Relief (VGTR) will be replaced by the Video Games Expenditure Credit (VGEC). We are reliably informed that this will be pronounced ‘V-JECK’… 

Up until now companies have largely claimed the VGTR whereby companies could claim back 25% of 80% of their core expenditure – offsetting this against their tax liabilities or receiving a direct payment. However, many features of this relief are about to change. 

What is the new Video Games Expenditure Credit? 

  • The new VGEC will have a headline rate of 34% - however the claims process for expenditure credits applies the current rate of corporation tax (25%) to calculations – so the effective rate is likely to be closer to 25.5%, which represents a modest increase from VGTR. 
  • Expenditure incurred in the European Economic Area will no longer be a qualifying criteria for tax claims – and only expenditure on goods ‘used or consumed’ in the UK will qualify. 
  • All new games must claim VGEC from 1 April 2025. Any games already in development  before 1 April 2025 can continue to claim VGTR (with EEA qualifying expenditure) until April 2027 
  • Companies may elect to claim VGEC from 1 January 2024 if they so wish for specific projects. All claims are done on a case-by-case basis and so companies will be able to claim VGEC for new projects and VGTR for projects in development simultaneously until April 2027. 
  • Under VGEC there will be NO subcontracting limit. Any remaining VGTR claims will still have the £1million subcontracting limit. 
  • The eligibility requirements for VGEC will be a minimum of 10% expenditure ‘used or consumed’ in the UK.  
  • The 80% cap on qualifying expenditure remains in VGEC. 

Why are things changing? 

Global changes to the international tax system agreed by the UK Government (OECD BEPS II if you’re interested…) as well as new obligations under World Trade Organisation rules (it starts with a B and it rhymes with exit) are affecting how a number of the audio-visual reliefs worked. In order to comply with these new rules, the Government consulted with industry on these changes at the end of 2022.  

Am I getting a higher rate of relief? 

Yes…but it’s not a 9% increase. The new rate represents a modest increase, but expenditure credits, like the R&D credit apply the rate of corporation tax to their calculations when determining the amount of credit a company receives regardless of their liabilities or company size. That rate is now 25% and when applied to the headline rate, the effective rate of VGEC is likely to be closer to 25.5%. 

Do I have to change now? 

Not just yet.  

Companies may choose to change to the new system from 1 January 2024 if they want to. 

However, there is a decent transition period for companies in moving to the new system – all new games from 1 April 2025 will be required to claim VGEC, but any long-term projects can claim VGTR until April 2027. 

If you’re claiming VGTR now you can continue to do so in the same way via the BFI certification unit.  

New claims under VGEC will also be administered by the BFI, however there are likely to be some additional steps to consider in determining the amount of credit you will receive (as detailed above where the rate of corporation tax is applied to your claim – regardless of your company size and any profit.) 

We will be working with the Government and the BFI on what those steps will be and what actions you will need to take in order to ensure a smooth transition to the new system and there are likely to be some associated administrative and IT changes to go with it. 

Will I be able to claim for European (EEA) expenditure? 

For now, yes, but not for long. 

Any new claims under VGEC from 1 January 2024 will not be able to use EEA expenditure as qualifying expenditure. 

Any new claims from 1 April 2025 will have to be on a ‘used or consumer’ basis within the UK. 

Games that are being developed over a longer period under the current VGTR rules will be able to claim EEA expenditure up until April 2027 when these rules will end. 

What about subcontracting? 

Under the new VGEC system there will be no subcontracting limit – however all subcontracting must be on a ‘used or consumed’ basis in the UK. More details on that below… 

If you still claim for a game under VGTR until April 2027, you can claim for subcontracting costs in the EEA, but you will be subject to the £1 million limit that is currently in place. 

What does ‘used or consumed’ mean? 

We will also be working with Government to determine how expenditure that is ‘used or consumed’ in the UK will apply to Video Games, as current equivalent definitions for the wider creative industries are not entirely applicable.  

We aim to work with Government on this during the Summer. 

What else was in the budget? 

Other tax credits – R&D 

From 1 April 2023 the Government will introduce an increased rate for loss-making R&D intensive SMEs. Eligible companies will have to spend over 40% of their money on R&D and will receive a credit of £27 for every £100 of qualifying expenditure. 

Investment Zones  

Universities and research centres clustered around innovation hubs will be given new financial support. Each of the 12 new “investment zones” will receive £80 million over five years and will be clustered around universities covering the life sciences, advanced manufacturing, creative industries, the tech sector and the development of green jobs. Eight existing and proposed combined authority areas across England have already been shortlisted to host the zones, with the intention to agree plans with the combined authority mayors, individual local authorities and business groups by the end of the year. 


  • Extension of Skills Bootcamps: with provision of £34.4m funding for an additional 8,000 Skills Bootcamps placements in 24-25. This will provide opportunities for people to re-skill in high value sectors such as construction and digital.  
  • Sector-Based Work Academy Programme (SWAPs): with expansion of placements for SWAPs by 40,000 over 23/24 and 24/25 with £28.8m new funding. This will provide those who are currently out of work with the training and work experience they need to get careers in high-demand sectors 
  • Lifelong learning enhancements with: reaffirmation of Lifelong Loan Entitlement with the aim of giving people the opportunity to study, retrain and upskill throughout their working lives. 
  • ‘Returnerships’: a new offer targeted at the over-50s, which brings together existing skills programmes, supported by £63 million of additional funding, focusing on flexibility and previous experience to reduce training length. 
  • Recommitment to maths to 18 and the rolling out of T Levels. 

Corporation Tax 

The rate of Corporation Tax will increase from 19% to 25%, meaning that companies which make a profit of more than £250,000 will pay 25% on those profits from April 2023 

We will post more information soon about what the VGEC changes will mean for you, drawing on some of our expert partner members. 

If you have any questions in the meantime please email dominic@ukie.org.uk