What is a video games tax relief loan?
This is a loan provided by a bank or another lender secured by the proceeds of the Video Games Tax Relief (VGTR). In other words, the bank or lender lends the video game development company money in the knowledge that its loan should be repaid from the proceeds of the VGTR.
How can a VGTR loan help your studio?
A potential issue for your studio is that under the VGTR rules, you will need to incur expenditure on your game before you can claim VGTR, which means that the VGTR proceeds will arrive too late to be used towards that particular game expenditure. One solution to this issue is to obtain a VGTR loan. This allows your studio to access the value of the VGTR earlier than if you were to wait for payment by HMRC, so that it can help with your cashflow and should mean that you can use the proceeds of the loan towards the costs of your game. In addition, it may help you to unlock other finance, as third party investors may be incentivised to invest in your game if they can see that you have already raised around 20% of your game’s finance from a bank or other financier.
What are the fees involved with a VGTR loan?
The bank or lender will charge interest and/or a fee for providing the loan. However, as the risk to the bank or lender is relatively low, the interest or fee should not be too high.
Typically there are also legal and accountancy fees involved with a VGTR loan, so it is important to assess the level of the total fees and make sure that the burden of incurring them is outweighed by the benefits of the loan.
How quickly can you put a VGTR loan in place?
Lenders tend to move quickly and typically a loan arrangement can be put in place (and the loan paid to you) within 1-3 weeks of the start of the process.
What information will you need to provide to the VGTR lender?
The requirements of lenders vary, but typically you will need at the very least:
- an Interim Certificate (a certificate granted by the British Film Institute that demonstrates that your game will pass the Cultural Test);
- an opinion or a letter from your accountant that sets out the anticipated VGTR proceeds; and
- certain information relating to the production and financing of the game, such as the composition of the finance for the game.
Is there anything else to consider?
Certain VGTR lenders may also be willing to provide other finance (in addition to a VGTR loan), such as a loan against a grant awarded by the UK Games Fund.