by Tim Davies, Sheridans
Covid-19 hasn’t affected the games industry nearly as much as the other creative industries -- pour one out for the musicians who still can't tour and the TV/film productions that have stalled due to lockdown -- but access to finance for games studios is still an ongoing battle.
Aside from the publishers, angels and VCs that are still a fantastic option for studios looking for funding, this article looks at some of the alternative funding options readily available to games studios in the UK as the country starts to open up.
VGTR
It is no secret that I am a huge advocate for the UK's video games tax relief scheme (VGTR), and VGTR continues to provide much needed financial assistance to small and large games studios across the country.
There were initially concerns in the industry about how VGTR would continue to work during a prolonged lockdown -- given that the VGTR application process ordinarily requires studios to submit hard copies of their applications and statutory declarations to the BFI prior to any certificate being issued. However, recognising the potential obstacles, the stellar team at the BFI’s certification unit quickly confirmed that it will accept electronic applications for any studios that are applying for their Interim or Final "British Game" certificate during the current lockdown.
Studios are still required to submit hard copies of the application form and statutory declarations, but these are now required to be provided to the BFI within six months from the date that the certificate is issued rather than at the time of applying. Failure to provide the hard copies within this time frame may see the certificate (and therefore qualification for VGTR) revoked -- if you are a studio that have received your certificate during the lockdown period be sure to mark your calendars and diaries to ensure that the deadline for submitting these documents is not missed.
If you have any questions concerning the VGTR application process then please get in touch and I would be happy to help. Alternatively, you can send your questions to the BFI’s certification team at certifications@bfi.org.uk.
R&D Tax Incentives
What? More tax stuff?! Yes, sorry, but (along with VGTR) the UK’s R&D tax incentive scheme is another fantastic source of free money for games studios.
If your studio is looking to make advances in technology, gameplay, or are working to find a solution to a problem which leads to a new process/product or generally improves the current state of capabilities/knowledge, this could qualify as R&D.
The above probably just sounds like a load of technical guff, but some examples of qualifying R&D work for games studios could include:
- creating improved multiplayer functionality for online or local multiplayer games;
- developing better environmental scanning tools for AR games; or
- developing new in-game motion controls for VR games.
Should I claim VGTR or R&D?
On paper the rates of relief look better for R&D, but the scope and spend that can be claimed for is wider for VGTR, so it’s worth taking the time to work out which is best for your studio. Additionally, with the right advice and structuring it is possible for all qualifying companies to access the higher rates for VGTR/R&D, which can result in a cash payment from HMRC (not just a deduction in your tax bill). Please get in touch if you would like to find out whether you are eligible to claim VGTR and/or R&D or need help.
Government Support and Finance
While the government is easing lockdown measures the business loans and finance options are still available for the foreseeable future. However, there are some timelines that studios will need to be aware of to take advantage of the support, including:
- Coronavirus Future Fund: applications for the Future Fund are currently only open until the end of September 2020
From the start of August, furloughed workers will be able to return to work part-time. From then, employers will be asked to pay a percentage towards the furlough salaries as follows:
For Ukie’s Navigating the Now series I sat down (virtually) with Ukie’s own George Osborn to talk about the various financial options open to games companies during the current pandemic, including the UK Government’s COVID-19 loans and other financial support. For those wanting a bit more detail of the financial assistance available from the UK government then my fireside chat with George is available to view here.
There is also a handy summary outlining the government’s financial support options that you can access via the Sheridans website, which is well worth checking out if you are looking for a concise go-to guide.
Look to your Ukie Network
One of the (many) brilliant things about Ukie is the access to a network of publishers, funders and financiers that specialise in helping fund games studios. Ukie members such as Sugar specialise in funding UA, app store revenues and VGTR, while Barclays and Coutts & Co. also have established VGTR finance offerings for larger studios looking to cash flow VGTR claims.
There are, of course, other members providing a wide variety of publishing, funding and finance services. Ask your network for recommendations and check out Ukie's full list of members here to find the right funding option for your studio.
About Tim Davies
Tim is a games lawyer and Head of Games Finance at Sheridans. He is widely regarded as the “go to” legal and commercial advisor for independent game developers, having been recognised by GamesIndustry.biz as one of the “rising stars in the games industry,” and listed in The Legal 500 as a Next Generation Lawyer for his advice to games companies. Tim is also a huge advocate for indie games and helps run Bonus Stage, an indie games showcase that takes place each year as part of London Games Festival. You can find him on Twitter at @tagdavies
Navigating Now and Beyond
This is part of our Navigating Now and Beyond in partnership with Sports Interactive series - guest articles and guides providing technical and practical advice for games companies to navigate working now and beyond the current Covid-19 crisis.
Find more articles at our Navigating Now and Beyond hub here.