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Mixed Messages

A Freedom of Information Act investigation into cultural tax relief for games and Sarassin LLP* are in the process of conducting a Freedom of Information Act investigation into submissions made to government by sections of the videogames industry, in relation to the proposal for videogames tax relief.

Summary to-date

The investigation is ongoing. In particular, HM Treasury is yet to disclose any information it holds, and this is currently the subject of appeal. However, the disclosure of ELSPA's formal submission in relation to tax breaks on September 2, 2009, indicates its private stance on the subject.

The following sets out in chronological order the key events leading up to (and following) the withdrawal of proposed games tax relief by the Coalition Government, together with links to relevant material.

The key time period is that starting on June 30, 2009, when the UK Department for Culture, Media and Sport (DCMS) issued a formal request to the videogames industry to provide concrete evidence and proposals for games tax relief, together with the contrasting responses of TIGA and ELSPA in August and September 2009.

January 24, 2008

ELSPA's then director general Paul Jackson meets with the UK minister for trade, Stephen Timms, and discusses tax breaks. The record of this meeting was disclosed by the Department for Business, Innovation and Skills (BIS) in August 2010 in response to the Sarassin LLP Freedom of Information request. This included the following note:

Just to let you know that tax breaks were discussed when ELSPA met with Stephen Timms last night. Paul Jackson told the minister that if a UK tax break was very specific, tightly defined and targeted at a certain type of game then they would support it. However they would be very unhappy at any suggestion that all games are cultural products because of the international trade problems we have already discussed. [...]

February 20, 2008

Michael Rawlinson, newly-installed director general of ELSPA, emails BIS with a draft statement (yet to be confirmed by the ELSPA Board) that "ELSPA will support the introduction of a French style tax credit system for games with more cultural content; whilst not undermining our essential status as software based products as demonstrated by our exclusion from AMSD."

AMSD is the EU "Audiovisual Media Services Directive" which applies essentially to films and television. In 2008 publishers were lobbying hard to keep videogames outside its scope, on the basis that games are "software" not "films".

June, 2009

The Department for Culture, Media and Sport (DCMS) issues a formal invitation to the UK games industry, including TIGA and ELSPA, to "build the evidence-based case by September for a culturally-based tax relief." This document includes the following section, setting out the specific information requested by DCMS:

Evidence Required:

1. Consideration of appropriate relief threshold. For example, the French system has a threshold of 20% relief on eligible costs. Is 20% an appropriate amount to incentivise companies to make games in the UK? Any evidence on the tipping point here would be useful and whether 20% should be applied across all games or the threshold should be related to the game budget.

2. Evidence setting out likely impact on the videogames market of introduction of such a measure (assuming the appropriate eligibility threshold). For example, is it likely that a significant number of games companies will apply for/receive this relief? Will the availability of this kind of relief affect/be of benefit to the console or online only market in particular? How? Will it disadvantage any companies in particular.

3. Evidence of the likely cost to Government, assuming qualifying criteria similar to the French scheme (eg. minimum spend criteria; amount of spend on "creative elements"; eligible content – no gross violence and appropriate cultural context); appropriate eligibility threshold).

4. A strong case for the cultural value of videogames, similar to the case submitted to the EC in support of the French relief.

June 30, 2009

Games trade associations immediately begin work to provide DCMS with evidence to support games tax relief.

ELSPA issues a press release on Sion Simon's public invitation for evidence and support for tax breaks, with the director general of ELSPA quoted as saying: "This is the culmination of a long campaign to get games recognised alongside film as a major contributor to the UK's economy and culture."

July 23, 2009

In a report by MCV, the director general of ELSPA is quoted as saying: ".... Endlessly calling for tax breaks is not enough. What is obvious is that hard evidence has so far been very lacking so the Minister has now asked ELSPA to help further the debate by furnishing that evidence. This, of course, we are happy to do."

August 2009

TIGA sends its submission on games tax relief to DCMS. This consists of a 68 page document addressing the questions raised by the DCMS Minister Sion Simon, including a full and detailed proposal of how the tax credit could work in the UK. The submission is a collaborative work by TIGA, Osborne Clarke and Games Investor Consulting but also involving Grant Thornton, Tenon Group, Games Audit Ltd, Deloitte and Blitz Games.

September 2, 2009

ELSPA sends its submission to DCMS on games tax relief, consisting of three pages setting out a number of concerns relating to the proposal submitted by TIGA. Although it broadly supports TIGA's detailed proposal, it also raises concerns with cultural tax breaks and reads in part:

"It is important to videogames publishers that videogames continue to be regarded by the EC as software. Currently, videogames are not affected by the imposition of retail levies, output quotas and the like which are applied to cultural industries (such as the French and Spanish film industries) in order to fund the tax relief schemes. Our concern is that the provision of a tax relief scheme on cultural grounds could label the industry's products, in the EC's view, once and for all as cultural, and that this could be an irreversible first step towards the imposition of retail levies or further protectionist regulation aimed at sourcing funding to support the tax relief scheme.

Any introduction of retail levies within the videogame industry would, from the publishers' point of view, erode any previous financial benefit derived from tax relief at the development stage, mainly because retail levies would apply across all products whereas only a percentage of videogames in development would be successful in obtaining tax relief. While we appreciate that such a situation has not yet developed in France where tax relief has been made available on a cultural basis, our concern is that the introduction of a similar scheme in the UK would identify the top two European videogames producing members as having a cultural classification, thus making it more difficult to retain our valued software classification."

November 25, 2009

ELSPA meets with the DCMS Minister Sion Simon to discuss multiple issues, including games tax relief, during which notes are taken.

The note of the meeting taken by a DCMS official states that: "ELSPA expressed concerns that a tax credit would not help the industry and are worried about what it would mean for the future. They are worried that the WTO may reclassify the games industry from software to cultural if tax credits are approved. They would like a study to take place before the implementation of tax credits to assess the impact. ELSPA feel that support for education... would be more helpful to the industry..."

ELSPA considers that this note is not an accurate record of what was said at the meeting. However, it repeats the points made in ELSPA's written submission of the September 2, 2009.

December 9, 2009

The government's pre-budget report rejects the case for tax relief for videogames, stating "... the Government is not currently persuaded that the evidence is sufficiently compelling to justify the introduction of a tax incentive for the development of culturally British videogames at this time." publishes a story entitled "Chancellor keeps quiet on videogames tax breaks" quoting the director general of ELSPA as saying "It is disappointing that the Chancellor has rejected the case for tax breaks for 'culturally British' games. Nevertheless we believe that the Government overall recognises the importance of our sector in creating wealth and securing jobs. We must now move on. We must build on the strong support Government has shown us elsewhere and, as the general election approaches, continue to develop and seek the adoption of our policies by all three major parties."

March 24, 2010

The final budget of the Labour administration shocks the industry by coming out in favour of tax relief: "The Government announces that, following consultation on design, it will introduce a tax relief for the UK's videogames industry, subject to state aid approval from the European Commission."

June 22, 2010

The emergency budget of the new coalition government reverses the decision to proceed with tax relief, with chancellor George Osbourne stating: "... we will not go ahead with the poorly-targeted tax relief for the videogames industry."

June 22, 2010 publishes a story entitled "ELSPA: Govt must work with industry to address skills gap".

The director deneral of ELSPA is quoted as saying: "... we are extremely disappointed by the outcome of today's Budget. Our industry will be rightly puzzled as to how tax breaks can be lauded before an election, only to be seen as 'poorly targeted' and scrapped just six weeks later. Therefore in the absence of tax breaks it is the essential that the government work with our industry to ensure that the policies which we have outlined - such as addressing the skills gap and better access to R&D initiatives - are implemented."

June 24, 2010

Develop Online publishes a story entitled "Global Publisher sabotaged UK games tax breaks", suggesting that lobbying by an unnamed publisher may have been responsible for the coalition government's decision not to proceed with games tax relief. [This story has since been removed from the site]

June 25, 2010 prints a story entitled "ELSPA: No "witch hunt" over tax break sabotage rumours", reporting ELSPA's comments on Develop's June 24 story.

The director general of ELSPA is quoted as saying: "We have no idea where that has come from, it's totally left of field and has certainly not been on the agenda of any of the many political briefings we've been involved in. That's not to say it's not true, but we've been discussing tax relief for some time, and lobbying solidly. It's something we haven't come across".

"We'll certainly make enquiries but it's highly unlikely anyone will admit to lobbying against tax relief for the industry. If we see some hard evidence then we'll listen to that, but there's certainly not going to be a witch hunt."

June 25 publishes a story entitled "Cecil: Publishers did lobby against tax breaks" in which Revolution Software MD Charles Cecil states that foreign-owned publishing companies lobbied against cultural tax relief in the UK.

July 7, 2010

Sarassin LLP sends three identical Freedom of Information requests to three government departments (DCMS, BIS and HM Treasury).

August 3, 2010

The first disclosure is received from BIS, being the email from Michael Rawlinson dated February 20, 2008 cited above.

August 4, 2010

HM Treasury refuses to provide any information requested.

August 9, 2010

The second disclosure is received from BIS, being the note of a meeting with Paul Jackson, then director general of ELSPA, with the then Minister Stephen Timms, on January 24, 2008 cited above.

August 11, 2010

Sarassin LLP writes a second letter to HM Treasury asking for clarification of the first response.

August 16, 2010

DCMS responds, with a full copy of ELSPA's formal submission of September 2, together with a single paragraph extract from a note of a meeting between the Minister Sion Simon and ELSPA.

One paragraph of that note has been withheld, claiming that "it is exempt from publication under section 43(2) (would, or would be likely to, damage the commercial interests of ELSPA) and 35(1)(a)(formulation or development of government policy).

1 September 2010

ELSPA issues a press release entitled "UKIE's Director General calls for a united interactive entertainment industry to work more closely together" in which the director general is quoted as saying "whilst ELSPA will continue to lobby on the introduction of tax breaks and other financial support to the games industry, we need to look at other ways of helping ourselves and of working more closely together to identify new business models that support industry growth".

September 23, 2010

Sarassin LLP lodges an appeal against the decision by HM Treasury not to disclose any information.

November 1, 2010 publishes a story entitled "Vaizey: Industry didn't agree on tax breaks" with the MP suggesting that current ideas for tax relief were not supportive of emerging business models afforded by new digital opportunities: "There was... a strong feeling among some elements of the videogames industry... to say, "Well, actually, are you simply going to put in place a system that supports an old model of making games and doesn't actually stimulate the new model?"

November 18, 2010 publishes a story entitled "Gauke on tax relief: We do not accept the validity of TIGA's analysis" in which Exchequer secretary to the Treasury David Gauke stated that TIGA's 68 page proposal did not add up economically, and was ultimately rejected because of this.

* For full disclosure, Sarassin LLP is owned by Vincent Scheurer, who also acts as company secretary of TIGA. understands that TIGA also made its own requests for information via the Freedom of Information act, but these were turned down. has no formal affiliation with TIGA, but is an associate member of UKIE.

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Matt Martin avatar
Matt Martin: Matt Martin joined GamesIndustry in 2006 and was made editor of the site in 2008. With over ten years experience in journalism, he has written for multiple trade, consumer, contract and business-to-business publications in the games, retail and technology sectors.
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