VIDEO game companies in the UK may be missing out on millions of pounds of tax relief, a tax advisory partner in Poole warns.

Heather Williams, from accountancy firm Azets, said many gaming companies in the country might not be utilising the government-supported video games tax relief (VGTR) scheme, despite a payout of £189 million to 345 claimants in the year up to March 2022.

The VGTR is available for expenses on the development of all British games intended for the public, except those created for advertising, promotion or gambling purposes.

Core expenses by video game companies include costs arising from designing, producing and testing games.

Heather said: "There are more than 2,200 games companies in the UK, but many don’t appear to be making use of this vital relief.

"With VGTR, as a rule of thumb, relief is available on up to 80 per cent of core expenditure, providing a net credit rate of up to 20 per cent of core expenditure.

"This benefit is receivable, either as a reduction in tax liabilities or as a direct payment to the company."

VGTR does not cover financing costs, interest, or marketing, publicity or advertising expenses.

In addition, it does not apply to the payment of an option over a video game.

The industry will soon experience a change in the scheme.

The video games expenditure credit (VGEC) scheme will be introduced for expenditure incurred from January 1 of this year and for all qualifying new games produced from April 2025.

Heather said: "This change in scheme might alarm games companies but the long and short of it is that the benefit will continue, with up to 80 per cent of core expenditure remaining eligible for relief and the good news is that the maximum net credit could be slightly higher at 20.4 per cent of core expenditure under the new scheme."

The video games sector is thought to be one of the UK’s fast-growing creative industries, contributing £2.8 billion to the economy and employing 27,000 people in 2019, according to government figures.