Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what guidance his Department issues on the liability to corporation tax of the video games expenditure credit.

The government will set out the detail of the Video Games Expenditure Credit (VGEC) alongside draft legislation in Summer 2023 and welcomes feedback. After this is published, the government will provide thorough guidance and education about how VGEC will work.

It was announced at Spring Budget 2023 that VGEC will be introduced from 1 January 2024. VGEC will be calculated directly from qualifying expenditure and have a credit rate of 34%, which will provide a greater benefit than the current Video Games Tax Relief. The expenditure credit model will also provide businesses with greater clarity about the amount of credit they can expect to receive and greater flexibility over production decisions. In addition, this reform will ensure video games tax relief continues to work as intended following the implementation of the OECD ‘Pillar 2’ rules in the UK and elsewhere.

VGEC will be modelled after the R&D Expenditure Credit (RDEC). The credit will be liable to Corporation Tax, like RDEC, and this was taken into account when the credit rate was set at 34%.