There is a wealth of world class production, development, design talent, and resources within the UK, making it both a hub and go-to destination for content development across multiple formats.

One facet of this growth has been within the immersive tech sector, especially for those entities catering to brands looking to widen their audience engagement through the commissioning and creation of “branded” immersive experiences.  This investment and spend has led to a significant increase in the number of companies looking to create immersive content and correspondingly an increase in the number of new entities who are establishing themselves within this sector or looking to transition their business model. The majority of these entities still work to the traditional “work for hire” model, moving from project-project, however, what many of these entities do not realise is that some of their projects may be eligible for one of the UK’s Creative Sector Tax Relief schemes.

The overall Creative Sector Tax Relief schemes are available to companies that predominantly work within film, animation television, high-end television (HETV), children’s television and video game development and now more recently orchestra, theatre, museums, and galleries. This article will focus on two particular schemes, namely Video Games Tax Relief (VGTR) and Animation Television Tax relief (ATR), and their application with the immersive tech sector.

Over the last few years, the creation of 360° video and interactive VR has surged, thanks in part to the advance in technology, but also to the increasing appetite for new forms of content creation.  Immerse UK recently commissioned a first of its kind report on the UK immersive industry.  Findings show the UK is emerging as a world leader in this sector. There are now around 1,000 immersive specialist companies in the UK, employing around 4,500 people, representing 9% of the global market. Predictions from Digi-Capital that the AR market could hit $85/$90 billion and the VR market $10-15 billion by 2022 show the potential of these new mediums.


There is a common misconception that these reliefs are the same as Research and Development (R&D) tax credits, but in fact they are not, and in most circumstances are more advantageous to claim than R&D credits. These tax relief schemes do not have complicated application processes, with an opportunity to claim up to 25% of UK core expenditure (on a maximum of 80% of the total if all UK spend) back as a tax relief, and in certain circumstances as a cash payment from HMRC, the time can be seen as being well spent.

Unlike R&D credits, both the VGTR and ATR schemes operate by assessing each project individually, with the Certification Unit at the British Film Institute (BFI) acting as the gateway to qualification for the tax reliefs. Here are some key aspects to consider for each:

Video Games Tax Relief

In the case of VGTR:

  • can the project be considered a game? – There will be an expected level of interactivity and gameplay elements which we discuss further below.
  • is it intended for supply?
  • is there a Video Games Development Company (VGDC) responsible for making the game from pre-development through to completion?

In assessing whether a project can be considered for VGTR relief, the BFI will review whether the content can be considered to be a game. As this assessment is undertaken on a project by project basis, it is difficult to set out a clear set of parameters for which a project must meet in order to be considered interactive.

However, it is clear that a project must go beyond being a mere 360 degree video and instead involve some elements of traditional gameplay i.e. some form of interaction with the content and feedback. One example of this would be a user interacting with a virtual storybook, where the actions and choices one makes within the game directly influences and changes the outcome, or a user interacting with a virtual museum and subsequently gaining points for the number of exhibits they find and view.

However, certain games could also be deemed ineligible if it appears they are produced for the intention of gambling and offer a prize (money or money’s worth) for example through a game of chance.

Animation Television Tax Relief

In the case of ATR:

  • at least 51% of the total core expenditure has to be incurred (on the completed programme) on animation expenditure;
  • there is an Animation Production Company (APC) responsible for making the programme from pre-production through to completion; and
  • the project must be intended for broadcast from the outset (this includes the internet).

There are some excluded programmes that include: any broadcast of live events or of theatrical or artistic performance, advertisements or other promotional material, and any programme produced for training purposes.

One key criteria is that the content cannot be for the purpose of advertising or for promotional purposes. However, just being commissioned by a brand doesn’t automatically exclude it. It is possible that, depending on the content, it may not be considered as advertising or promotional. With an increasing number of brands looking to commission content that isn’t focused around the brand, you can see the potential for these types of projects to qualify. However, these projects still need to be assessed by the BFI on a case by case basis and early engagement is advised.

The Cultural Test

In order to qualify for VGTR or ATR the content must pass a Cultural Test which certifies the project as British. This test is administered by the BFI Certification Unit using a point based system which requires the project to gain just 16 out of 31 points in order to pass. Each piece of content is individually assessed and can potentially gain points from a range of cultural attributes, including such things as:

  • being set in the UK/EEA or undetermined locations;
  • containing UK/EEA or undetermined citizens or residents;
  • containing English language or demonstrating British creativity, British heritage and/or diversity; and/or
  • production or development activity being undertaken in the UK, and key personnel being citizens or residents in the EEA.

However, the threshold for gaining the points is relatively low and so many projects have the potential to pass the video games or animation television cultural test and qualify as British.

Sol Rogers, CEO of REWIND, Chairman of Immerse UK and the BAFTA Immersive Entertainment Advisory Group said:

“It’s fantastic that these schemes are available to the UK immersive industry, it will help us keep ahead of the international competition. The openness of the BFI Certification Unit and HMRC to acknowledge and respect this new immersive industry, and the flexibility of the schemes, is a huge plus and provides the support the industry needs to continue to progress.”

In addition these schemes are designed to encourage and support the investment and growth of talent within the UK Creative sectors. A lack of talent is one of the biggest barriers to growth at the moment.

Sol continued:

“Regardless of what platform a company develops for, I urge them to start looking at whether or not they have projects which could qualify. These schemes are in place to support British developers and the financial benefits to smaller businesses can have a big impact.”

Further information and contacts

For further information, visit contact the BFI Certification Unit and BFI website for helpful guidance on how to get started with the process. Sheridans can also help advise on the process and are working with a number of clients to help them take advantage of these reliefs.

Photo by Keegan Houser on Unsplash