Department of Culture - Consultation on Tax Breaks for Compu

[RWAP]

I see that the Department of Culture have now started the consultation process on how tax breaks for the computer games industry should work.

See http://www.culture.gov.uk/consultations/default.aspx

The criteria for eligibility is based largely on links to the UK culture and whether parts of the game have been designed / coded using techniques developed in the UK or by programmers from the UK.

I think that some feedback should be provided to help ensure that new games developed for the ZX80 / ZX81 and Speccy can attract some form of tax relief - maybe even where the games are released into the public domain - to help people developing new games.

It is hard to think of a good way of this working, but of course, the ZX81, Speccy and Sinclair scene remain a very important part of the UK games culture - I wonder if it could be widened to new hardware too..

Does anyone have any thoughts ?

[Rink]

I'm not generally a big supporter of tax breaks - but I definitely think fairness should dictate that retro computing get some - particularly when it comes to preserving our history/heritage and the educational value that retro computing has.

Retro computing is also one of the best ways of ensuring our home-grown programmers have a good grounding in the fundamentals of programming and computing systems before they move on to all the modern theories and development practices. I've seen more talent on this board and in the scene as a whole in the UK and Germany than I have in all of the people showing up for jobs straight out of university.

There's a lot of things I'd like to see included, such as breaks on components used to repair classic systems; and tax breaks for developers who aren't exactly going to make lots of money on their projects but are augmenting these wonderful subcultures. The actual business of manufacturing and selling these niche projects is also extremely valuable. I'm sure anyone who has created something that they've sold to the scene has learned a lot about the processes - skills they would take with them into more commercial ventures in the future, or to employers. That's something that should be encouraged... and incentivised if necessary.

Edit: It's pretty clear in my mind that retro computing falls nicely under (c) Maintaining a critical mass of UK infrastructure, creative and technical expertise, to facilitate the production of culturally British video games in the objectives of that proposal.

[RWAP]

I wholeheartedly agree with this - and do believe that maybe we should recommend that extra criteria is added to award points for the development of hardware specifically designed for use within or encouragement of the UK games industry - this might cover things such as the ZXpand and MrX sound interfaces, as those have specifically led to the development of new games and enhancement of games produced for the ZX81.

The problem is the need to get 16 points in order to qualify. The suggested method of awarding points is contained in the appendix to the short document:
http://www.culture.gov.uk/images/consul ... Condoc.pdf

To some extent new games produced in the UK for the ZX80 / ZX81 would hopefully meet many of the criteria for points:

- Written for a 1980s UK computer which helped create the UK games industry (2 points under section B)
- Specifically for ZX81 / ZX80 assembler code (British technology) (2+ points - section A)
- Written by a UK citizen (I presume) (1 point - section D)
- Sold by a UK software house - (1 point if seen as the manager - section D)
- Artwork (and music) - designed in UK? (2 points - section C)
- Is it set in the UK/European Economic Area or a fictionalised region of the UK / EEA ? (2+ points - section A)
- Lead character is a British citizen (2+ points - section A)
- Game is produced mainly in the English language (2 points - section A)
- Programming and conceptual development in the UK (2 points - section C)
- British / European narrative structure or underlying material created by a British/European citizen or resident (4 points - Section A)

Some people would say that with games being made for free download, or where sales do not cover the production costs, what is the benefit....

If the business is a limited company selling games, and it doesn't make a profit, then there is no benefit (except maybe increasing losses to carry forward to offset against future games).

In the case of a small trader (such as myself), or private individual, or company making profits elsewhere, then the tax allowance will presumably increase the amount of losses on producing the software, which can be offset against other income (say PAYE income)....

The problem is that at the moment, people don't get paid for producing much software - so how is the profit / loss to be calculated?

Maybe it could start a resurgence in producing commercial titles.

[Rink]

Some people would say that with games being made for free download, or where sales do not cover the production costs, what is the benefit....

The benefit is in everything except for the end user's VAT contribution (since they didn't buy it, or there weren't many that did). In terms of the main objectives of the consultation, free games or those that sell in limited numbers should be as valid as any.

In the case of a small trader (such as myself), or private individual, or company making profits elsewhere, then the tax allowance will presumably increase the amount of losses on producing the software, which can be offset against other income (say PAYE income)....

In your case, what you need is a break from the government to ease the costs associated with the production - there are usually some even in small projects - based on the idea that your cultural contribution and contribution to the 'infrastructure' is worth encouraging. But with no earnings, where do you apply the break? The only thing I can think of is that you get an added discount as part of claiming back VAT - e.g. as a business you claim back the VAT on getting your covert art printed, but at the same time they give you a large refund based on the fact it's for a British video game.

Maybe it could start a resurgence in producing commercial titles.

I think a large portion of the people here would love to see software for retro systems become a saleable item again but for that what we need is a resurgence in people buying commercial titles, not interest in developing them. Really, I think you'd have to see a retro system back in a high street shop before you'd get the general public buying a new ZX/Dragon 32 game.

Retro development is like jazz. It's created by intelligent (and strikingly good-looking) enthusiast developers such as ourselves, and "sold" to other intelligent enthusiast developers. The mainstreamers don't get involved.

[RWAP]

My own suggested response to this consultation is set out below. This refers directly to the questions asked in the consultation paper - http://www.culture.gov.uk/images/consul ... Condoc.pdf

Does anyone have any comments / suggestions before I send it off?

Dear Sirs,

I welcome the recently published consultation document on how the tax relief for the British Video Games Industry should operate.

As a small independent trader supporting the retro video games industry, I would like to see some acknowledgement of the important role played by the early British computer industry, in particular Sinclair and Acorn computers, which helped to create the video games industry in the 1980s and are actually still actively supported and developed today by a growing band of retro computer enthusiasts.

Retro computing is also one of the best ways of ensuring our home-grown programmers have a good grounding in the fundamentals of programming and computing systems before they move on to all the modern theories and development practices - with the focus being on achieving spectacular results in a limited operating environment, squeezing the maximum out of hardware and operating systems (for example writing games in just 1K of memory, compared to modern systems which tend to have at least 32,000 times that much memory!). It also encourages youngsters to lean unique program development skills which can be easily transferred onto more modern systems.

My own business is based on paying for the development of hardware in order to keep retro computers working and encourage their wider use, thus helping meet the stated objective of Maintaining a critical mass of UK infrastructure, creative and technical expertise, to facilitate the production of culturally British video games.

As part of this, as well as financing the production of new hardware, I have actively encouraged the development of new computer games for a range of computers, targeted at the traditionally British home computer - the Sinclair ZX Spectrum and Sinclair ZX81, with several commercial and public domain releases over the past 2 years, written by British and European authors.

I also think that the tax relief should include additional points criteria for the development of hardware which is specifically designed for use within or encouragement of the UK games industry - in my own case for example, we have invested over £20,000 in the production of replacement keyboard membranes (made in Scotland) to keep retro computers working over the past 2 years, plus a further £11,500 (minimum) in the development of new hardware specifically designed to encourage and enhance the development of new games software for the ZX81 and ZX Spectrum, such as the following:

- Mass storage devices for the ZX Spectrum and ZX81 offering instant saving and loading (rather than having to save to tape or disk) - improving the speed at which games can be developed and also making games more easily available to a wider market (as games can be distributed via the internet)
- An ethernet card for the ZX Spectrum allowing the possibility of playing multi-user games over the internet (with one such game released in 2012 to complement the release of the hardware)
- Sound and joystick interfaces to encourage the production and use of improved sound (the ZX81 does not have any sound facilities built in at all), and again to target the actual games market where playing games on a keyboard is no longer acceptable.

I realise that to some extent, the retro computer scene may be seen as too small to be relevent, although it is a market which continues to grow, with more and more people acquiring the old machines to find out how they work, learn to program and develop new hardware - my own customer database is in the region of 6,000 currently active users who continue to actively promote and support the machines.

This type of activity certainly supports the three stated main aims of the tax relief:
- Encouraging the production of video games that might not otherwise be made
- Promoting sustainability in British Video Games (what can be more sustainable than continuing to develop and widen the appeal of 30 year old British computers?)
- Maintaining a critical mass of UK infrastructure, creative and technical expertise, to facilitate the production of culturally British video games.

Specifically responding to the queries raised in your consultation paper:

Q1. I would like to see this widened slightly, as it may be one person who is responsible for both programming, the scenario, animation and or sound environment.
Q2. Personnel costs should be widened to include any royalty payments to such persons (as they may be self-employed)
Q3. I think that it would be advisable to include some points for games which are specifically written for computers and games consoles which are closely associated with the British video games industry
Q4. I agree that this is appropriate, but feel that it should be enhanced to cover the production of hardware specifically designed for use within or encouragement of the UK games industry
Q5. I think that the list of roles is sufficient
Q6. Part of the cultural test could be related to the use of hardware which is closely associated with the British gaming industry, which would help cover the retro computing scene
Q7. I think I have already covered this
Q8. One of the issues of using the BFI to assess the cultural test is going to be (a) their access to relevant hardware and platforms on which to test the games, and (b) their ability to play the games to high enough a standard to assess the game further than just the introductory part.

I would suggest that it could possibly be a joint exercise between the National Museum of Computing (at Bletchley) and the BFI as this would merge the two worlds and give a wider view on the cultural viability of a video game.

My concern is how any tax relief would apply to independent and small developers and production houses (such as myself) - in particular as corporation tax does not apply to us, although we are subject to income tax on any profits (and can offset some of the losses against tax on other income), particularly as many games are released into the public domain for download as well as being offered for sale.

Perhaps one option would be for the tax relief to be provided in such a way that the companies / individuals concerned could elect to (a) receive it as a discount on turnover related to the particular game / hardware which is eligible for relief, or (b) receive it by way of a refund on the VAT paid for production of the game / hardware

[sirmorris]

Rock on

[Rink]

Looks comprehensive and quite persuasive to me.