A studio spending £1.5m on a game will, at the time of writing, get back somewhere in the region of £300k from HMRC — but only after the accounting period closes, the return is filed and HMRC processes the claim. That is a year or more of dead money in a business that lives on monthly burn. A VGEC loan advances that credit so the cash lands while the game is still being made. This post is for UK studios that have claimed under VGTR before and want to know what the switch to the Video Games Expenditure Credit changes about borrowing against the claim — and what it doesn't.
The VGTR to VGEC transition, plainly
Three dates matter, as at the time of writing:
- 1 January 2024 — VGEC is available for accounting periods ending on or after this date. You elect into it.
- 1 April 2025 — VGTR closed to new games. Anything that started development after this date claims under VGEC only.
- 31 March 2027 — the last date to which existing games can keep claiming VGTR. After that VGTR ends entirely and every claim, for every game, is a VGEC claim.
So if your game was already in development before April 2025 you may have a choice of regime for periods up to March 2027. If it started later, there is no choice. Either way, the March 2027 cliff is fixed, and any studio still on VGTR should already be planning its last VGTR period with its accountant. Nothing here is tax advice — your adviser should model both regimes against your actual spend profile.
What changes in how a lender sizes a VGEC loan
Under VGTR the relief was an additional deduction of 100% of qualifying core expenditure, capped at 80% of core expenditure, which a loss-making studio surrendered for a payable credit at 25%. In cash terms that was worth up to roughly 20% of core spend.
Under VGEC the credit is 34% of qualifying UK core expenditure, again capped at 80% of total core expenditure. The catch is that the credit is taxable at the 25% corporation tax rate, so the net value is about 25.5% of the qualifying amount. It is paid "above the line", which changes where it sits in your accounts, and it can still be surrendered and paid out to a loss-making company.
For a lender, three things follow from that:
- We size on the net figure, not the headline. A 34% credit that is taxed at 25% is a 25.5% credit for the purpose of working out what HMRC will actually pay. The accountant's letter should state the expected net receipt, and that is the number we advance against.
- The UK expenditure test replaces the old EEA test. Spend must be "used or consumed in the UK". Contractors in Poland or Spain that counted before do not count now. If a chunk of your build is outsourced abroad, the qualifying base — and therefore the loan — is smaller than your old VGTR model would suggest.
- The subcontracting cap is £1m per game. Studios that lean heavily on external art or engineering need to check how much of that spend survives the cap before they estimate a claim.
| Point | VGTR | VGEC |
|---|---|---|
| Mechanism | 100% additional deduction, surrendered at 25% | 34% expenditure credit, taxable at 25% |
| Cap | 80% of core expenditure | 80% of total core expenditure |
| Net cash value | Up to ~20% of core spend | ~25.5% of qualifying UK spend |
| Geography test | EEA expenditure | UK expenditure only |
| Subcontracting | £1m cap | £1m cap per game |
| Available until | Periods ending by 31 March 2027 (existing games) | Ongoing |
What stays the same for a video games expenditure credit loan
Most of the lending process is unchanged, which is the useful news for a studio that has borrowed against VGTR before.
- The interim BFI certificate is still the gateway document. No certificate, no claim; no claim, no loan. We have written separately about what lenders need from the interim BFI certificate and why it is worth applying early.
- An accountant's letter still confirms the expected claim value. The only difference is that it should now show the net-of-tax figure under VGEC.
- We still advance up to 80% of the expected credit, secured on the receivable from HMRC and usually a debenture. No warrants, no equity, and no personal guarantees as standard.
- Pricing is still typically in the teens per annum for a clean claim, and drawdown can happen in as little as a week once the documents are in.
We have been lending against VGTR since 2018, and our VGTR and VGEC loan facility has simply added the new regime to the same underwriting.
A studio has £1m of core expenditure, all of it UK. The 80% cap brings the qualifying amount to £800k. Under VGTR the additional deduction of £800k surrendered at 25% produces £200k of cash. Under VGEC the credit is 34% of £800k, or £272k, which after tax at 25% nets to £204k. On identical spend the two regimes land within a few thousand pounds of each other. A lender advancing up to 80% of the expected credit would offer roughly £160k in either case. Where the numbers diverge is when spend is not all UK: the VGEC base is the lower of UK core expenditure and 80% of total core expenditure, so if £400k of that £1m went to an EEA contractor, only £600k qualifies, the credit is £204k and the net receipt falls to about £153k — roughly a quarter less loan. All figures are rounded and illustrative.
Timing a claim and a facility mid-project
The transition mostly bites studios that are part-way through a game. A few practical points from the lending side:
- Decide the regime per accounting period, and tell the lender. A facility is sized against a specific period's claim. If your next period will be your last VGTR claim and the one after will be VGEC, the accountant's letter needs to say so, and the advance for each period is calculated differently.
- Do not let the certificate lag the claim. The interim certificate is game-specific, not regime-specific, so a game that already holds one carries it into VGEC. A new game needs its own application, and BFI processing takes weeks, not days.
- Match the loan term to the HMRC receipt. A tax credit advance is repaid from the credit itself, so the term runs from drawdown to the expected payment date, typically 6–12 months. Under VGEC, allow for the accounting period end, the filing, and processing time.
- If the gap is bigger than the credit, say so. A tax credit advance covers the claim, no more. If the studio also needs to bridge a publisher milestone or a delayed round, that is a separate conversation about a bespoke bridge loan, and it is easier to structure both together than to bolt one on later.
What a lender needs from you
- Interim BFI certificate for the game (or evidence the application is in and the cultural test evidence is complete).
- An accountant's letter confirming the expected net VGEC credit for the accounting period, and which regime the claim falls under.
- A core expenditure breakdown showing UK versus non-UK spend and any subcontracted costs against the £1m cap.
- Latest management accounts and a monthly cash-flow forecast to the expected HMRC payment date.
- Claim history — prior VGTR claims paid without enquiry help the pricing.
- Company structure and cap table, so security can be taken over the right entity.
A word on when this is not the right answer. If your claim is small enough that an 80% advance is below £100k, we are not the right lender. If a bank will fund the gap on workable terms, take it — we are cheaper than equity but more expensive than a bank. And if the cultural test is marginal, sort that out before you talk to anyone about a loan; a VGEC loan without a certificate behind it is a bridge, priced as one.
If your studio is moving off VGTR, or claiming under VGEC for the first time, send us the accountant's letter and the certificate status and one of us will tell you what an advance would look like.
Frequently asked questions
Will a lender advance more under VGEC than under VGTR?
On the same all-UK spend, not much more. VGTR was worth up to roughly 20% of core expenditure; VGEC is 34% on the capped amount, taxed at 25%, which nets to about 25.5% of the qualifying spend. Run that through the 80% cap and the two land close together. Where VGEC can be smaller is where a lot of your spend was EEA contractors, which no longer qualify under the UK expenditure test.
Does the lender advance against the 34% headline or the net figure?
The net figure. The expenditure credit is taxable at the 25% corporation tax rate, so the cash HMRC pays a loss-making studio is about 25.5% of the qualifying amount, not 34%. A lender sizes the advance, up to 80%, on the expected net receipt stated in the accountant's letter. Any lender quoting against the headline is either mistaken or will haircut it later.
Do I need a new interim BFI certificate when I switch to VGEC?
No. The interim certificate is issued for the game, not the relief regime, so a game that already holds one carries it into a VGEC claim. What you do need is an updated accountant's letter that states the expected credit under VGEC rather than VGTR. A new game, of course, needs its own application, and processing takes weeks.
Can I still borrow against a VGTR claim before March 2027?
Yes, at the time of writing. Existing games can keep claiming VGTR for accounting periods ending on or before 31 March 2027, and a lender can advance against those claims exactly as before. What we ask is that the accountant's letter is explicit about which regime each period's claim falls under, because the sizing is different for each.
How quickly can a VGEC loan draw down?
Once the interim certificate, accountant's letter, budget and cash-flow forecast are in, drawdown can happen in as little as a week. The slow part is almost always the certificate. If the cultural test application is still with the BFI, we can start underwriting in parallel, but funds move once the certificate is issued.