The UK has been a leader in gaming for decades. It is home to some of the most iconic intellectual property in the sector, including Grand Theft Auto and Tomb Raider.
The UK gaming industry continues to experience a meteoric rise, with cutting-edge developments in game design, software, and immersive technologies positioning it at the forefront of global innovation.
In 2024 alone, the projected revenue in the Video Games market in the United Kingdom is set to reach £6.72 billion.
However, amidst the rapid pace of advancement, many gaming companies may be missing out on a valuable opportunity: R&D tax relief.
While it’s easy to assume that any innovative work in game development automatically qualifies for R&D tax relief, this assumption could be leading businesses down a complex path that risks unnecessary scrutiny from HMRC.
Just as in aerospace or AI, gaming companies must ensure they meet the specific criteria for R&D tax relief, which goes beyond simply being innovative.
The challenges facing R&D in gaming
R&D in gaming operates in a fast-moving, tech-driven environment, with constant advances in areas like virtual reality, and interactive storytelling.
However, when it comes to R&D tax relief, the definition of innovation is more nuanced than many companies realise.
R&D tax relief is designed to support projects that make an advance in science or technology, and the work must involve overcoming uncertainty.
However, gaming companies often work within established technologies and frameworks, building on existing knowledge of game engines, programming languages, and graphics techniques.
While this is certainly innovative, it may not always qualify as R&D for tax purposes.
Novelty: The key to R&D eligibility
To qualify for R&D tax relief, gaming companies must demonstrate that their work is genuinely new and adds to the sum of knowledge in the field.
This doesn’t mean simply creating a new game or introducing a fresh feature. The work must push the boundaries of what is scientifically or technologically possible in game development.
For example, if a studio is developing a new game engine that improves rendering speeds or creates a more immersive AI-driven experience, this could be considered a technological advance.
However, adapting an existing game engine for a new title might not qualify, as it builds on existing technology without necessarily advancing it.
The challenge for the gaming industry is in identifying which projects meet this stringent definition of innovation.
Projects that successfully apply new scientific or technological principles to create something genuinely novel are more likely to qualify for R&D tax relief.
What qualifies as R&D in gaming?
When determining whether a gaming project qualifies for R&D tax relief, it’s essential to focus on whether the work involves a true advance. Qualifying projects might include:
- Developing new game engines or tools that improve graphics, processing speeds, or AI behaviour.
- Creating innovative algorithms for procedurally generated content or new forms of interactivity.
- Solving technical challenges related to multiplayer networking or cross-platform gaming.
- Pushing the boundaries of virtual or augmented reality to create more immersive experiences.
Importantly, even projects that attempt but fail to achieve these advances may still qualify for R&D relief, as long as they were aimed at overcoming technical uncertainties.
Standing out in a crowded market
As gaming companies increasingly turn to advanced technologies to stay competitive, there’s a temptation to assume that R&D tax relief applies to all technical work.
Developers and publishing houses, as well as the professional advisers that support them, must tread carefully and ensure that each project is properly assessed.
By working with expert advisors who understand both the gaming sector and R&D tax criteria, gaming companies can confidently identify qualifying work, maximise their claims, and avoid the risk of enquiries or investigations from HMRC.
Upgrade your R&D strategy with randd uk
Gaming companies should take the time to review their projects, focus on the technological advances they are making, and ensure their R&D claims reflect the true novelty and complexity of their work.
By doing so, they can harness the full potential of R&D tax relief and continue to lead the way in one of the UK’s most exciting industries.
For expert guidance on how gaming projects might qualify for R&D tax relief, get in touch with our advisory team today. Let us help you level up your innovation!