SolvedVGDC55110 | Calculation: surrenderable losses and Video Games Tax Credit - examples - single-period developments
From HM Revenue & Customs · Video Games Development Company Manual
The following example illustrates how Video Games Development Companies (VGDCs) that sustain a surrenderable loss can surrender that loss in return for a payable tax credit (VGDC55100). In each case the development is completed within a single period.
Example 1
A VGDC makes a video game with total core expenditure of £1m, all of which is European expenditure. The video game was commissioned by a publisher that pays £900k for it.
| - | Amount | Amount |
|---|---|---|
| Income | - | £900k |
| Expenditure | - | £1m |
| Pre-VGTR profit (loss) | - | (£100k) |
| Enhanceable expenditure (European core expenditure of £1m x 80%) | £800k | - |
| Additional deduction | - | (£800k) |
| Post-VGTR profit (loss) | - | (£900k) |
The surrenderable loss is the lesser of:
the trading loss: £900k and
the enhanceable expenditure on which the additional deduction for period: £800k.
In this case, the VGDC can surrender up to £800k.
The amount of credit due is:
the payable credit rate: 25%
multiplied by
the loss surrendered: £800k
giving a payable credit of £200k. This is equal to 20% of the total core expenditure. The VGDC is not obliged to surrender the entire loss, but it will most likely do so.