Games company founders and execs are sometimes surprised when they learn that VGTR claims are not always paid out in cash (especially when that cash is sorely needed to prop up the studio’s runway).

Let’s look at a high level studio lifecycle to help explain.

👉 Pre-revenue / development phase

During the pre-revenue phase, the company will be operating at a loss.  In this situation, VGTR will always be paid out in cash.

❗However - a note of caution here: 

If you have any outstanding HMRC liabilities such as PAYE/NICs, VAT or Corporation Tax, HMRC will net the claim off against the outstanding liability.  One to watch out for if you have HMRC debts.

👉 Post Release

When the game has been released, you will hopefully start to see revenue coming in to the company.  If your total costs are greater than the revenue (ie: you are operating at a taxable loss), you will still receive the VGTR claim in cash.

When the company starts operating at a profit, and therefore you have Corporation Tax payable, depending on the size of your taxable profit two things may happen:

1. Your VGTR claim will simply reduce the amount of your Corporation Tax due, and no VGTR cash will be received.  However, you have received the benefit of a lower corporation tax bill; or
2. The VGTR claim will be of an amount whereby your Corporation Tax bill will be reduced to nil, and you will receive the residual portion of the VGTR claim monies in cash.

🔺Remember

VGTR claims are made as part of your Corporation Tax return.  If there is corporation tax to pay, this will be payable first before any pro-rated VGTR claim can be paid in cash.