Finance (No. 2) Bill (First sitting)

Matt Turmaine Excerpts

Tuesday 27th January 2026 Public Bill Committees

[James Wild]

As the Minister said, these clauses are mainly technical, tidying-up measures, but they are worthy of debate none the less.

Clause 31 clarifies the corporation tax treatment of payments made in return for the surrender of research and development expenditure credit, audiovisual expenditure credit or video games expenditure credit for payments made on or after November 2025. This technical clarification ensures that, when companies sell or surrender tax credits, the accounting treatment is consistent and correct.

R&D expenditure credit has been in place since 2013 to support companies carrying out R&D, and these creative industry expenditure credits will fully replace the old film, high-end TV, animation, children’s TV and video games tax reliefs from April 2027. At the moment, there is no agreed approach between tax authorities and companies on how to treat payments received when these credits are surrendered for corporation tax purposes, which has created uncertainty.

Clause 31 will hopefully put that beyond doubt by setting out a clear tax treatment in law, and HMRC will update its guidance manuals to reflect the new rules. Does the Minister have any figures—I do not have the TIINs to hand on this one—on whether that uncertainty has cost companies, or cost the Government, in lost revenue?

Clause 32 corrects transitional rules between the video games tax relief and the video games expenditure credit to ensure that the new expenditure credit works fairly for games that are moving over from the old relief. It corrects how the expenditure credit is calculated for transitional games—those that already have tax relief claims and then opt into the new scheme—so that companies do not get too much or too little relief, simply because the old regime used European expenditure while the new one uses UK expenditure.

In effect, clause 32 ensures that companies switching schemes do not get double relief or under-relief. Can the Minister provide an estimate of how many video games development companies will be affected by this transitional correction, and whether any have suffered financial detriment under the previous rules?

Clause 33 makes changes to the special credit for visual effects, which is part of the audiovisual expenditure credit, as the Committee will be aware. It prevents the calculation for additional credit from producing incorrect results, correcting anomalies in the visual effects credit calculation. The explanatory notes explain that, without this fix, certain combinations of expenditure could generate incorrect credit amounts or negative values, so clause 33 ensures that the scheme operates as intended and that the special credit scheme is neither more nor less generous than intended. Does the Minister have any figures on how many production companies have experienced calculation errors as a result of the previous rules?

[Matt Turmaine (Watford) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Roger. I will speak briefly on clause 32, as a member of the all-party parliamentary group for video games and esports, to say to the Minister that I welcome the closing of this loophole. Does she agree that the change will support the British video games industry, which is industry-leading across the world, and deliver the best for our economy?

[Lucy Rigby]

I wholeheartedly agree with my hon. Friend the Member for Watford about the impact of these measures.

In relation to clause 31, if only the shadow Minister, the hon. Member for North West Norfolk, had the TIIN to hand; if he did, he might have been aware that we estimate that the payments for the surrender of expenditure credits will have an impact on roughly 12,000 claimants of R&D expenditure credit, audiovisual expenditure credit and video games expenditure credit.

The shadow Minister asked about the impact on video games companies: I think it is fair to say that if a company has a game that switches from the video games tax relief to the video games expenditure credit, it simply needs to make sure that it uses the modified version of step 2 when calculating how much credit it is entitled to. This will affect only games that are already in development and need to switch reliefs. There are no figures available to show the impact on companies; it is normally in the tax line, so it is not treated as taxable by most companies. I think that answers all of his questions.

Question put and agreed to.

Clause 31 accordingly ordered to stand part of the Bill.

Clauses 32 and 33 ordered to stand part of the Bill.

Clause 34

R&D undertaken abroad: Chapter 2 relief only

Question proposed, That the clause stand part of the Bill.