By: Douglas Tailby, Diarmuid Ware
09 Nov 2026 4 min read
If you develop video games and still claim Video Games Tax Relief (VGTR), now is the time to plan your move to the Video Games Expenditure Credit (VGEC). The two regimes are currently running side by side, so some of your games may still have a choice. That decision deserves careful thought, because it affects your tax position and, with it, your cash flow, reporting and funding decisions. The sooner you understand the differences, the more accurately you can forecast the impact.
For any game starting development from 1 April 2025, VGEC is the only option. Games already in development before that date can keep claiming VGTR until 31 March 2027, or opt in to VGEC sooner. That means the two regimes can, and often will, sit side by side across your portfolio, with each game on whichever is likely to deliver the best result.
Whether running two regimes is an opportunity or a headache depends on how your portfolio is structured, where and how you develop your games, and what that means for cash flow. New rules also mean you need to consider research and development (R&D) tax relief alongside VGEC where a game’s costs could qualify for both. Miss that, and you could lose reliefs you were expecting. Our earlier article explains more: Video Games Tax Relief and R&D - new game plan required.
On paper, the two regimes deliver similar rewards. In practice, they work very differently:
The mechanics arguably matter more than the rate. Accounting policy choices can compound the effect, changing how each regime shows up in your financial statements, and how your company’s financial position looks to lenders and shareholders.
VGTR was generous on geography, recognising qualifying spend across the UK and the European Economic Area. VGEC narrows this to costs used and consumed in the UK, which shrinks the pool of qualifying expenditure for many developers. On the plus side, VGEC removes VGTR’s £1 million cap on subcontractor spend, a change the industry has long lobbied for. Together, these differences can decide which regime works best for a game, and they can hit cash flow hard if you haven’t planned for them. Overseas work, and how it interacts with the used and consumed definition, needs particular care as the rules are not as straightforward as some people expect and in some circumstances overseas expenditure can still be included in the claim.
VGEC also introduces specific rules for connected-party spend. These transactions must be priced on arm's-length terms and disclosed in your claim. If you work with related parties, or your group uses special purpose vehicles, that adds a transfer pricing dimension. It also gives HMRC far greater visibility of these transactions, so your pricing and documentation choices will come under closer watch.
From 1 April 2027, VGEC is the only option. Until then, you can still choose deliberately, rather than by default. Either way, every developer needs to understand what VGEC means for them, and soon.
If you'd like a second pair of eyes on which regime suits which game, or help planning for the transition, talk to our creative sector tax team. We’d be glad to help.
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