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Last Updated: Friday, 20 February, 2004, 17:16 GMT
UK movie productions 'shut down'
Johnny Depp
Johnny Depp: His new film The Libertine is in limbo
Movies being filmed or about to start filming in the UK face "disaster" after unexpected changes to UK tax rules.

Tulip Fever, starring Jude Law, was to start filming in April - but is on hold after the government closed a tax loophole it said was being abused.

And The Libertine, with Johnny Depp - due to start filming on Monday - is also among 40 films in jeopardy.

The industry is hoping the government will agree to keep the loophole open for movies that are already under way.

The Inland Revenue says investors "exploited" the loophole by putting money into a film but pulling out before it reached cinemas - and avoiding paying tax on their investment.

I believe some production companies are already laying off staff, which is a disaster
Amy Seely
British Screen Advisory Council

The film industry wants the government to keep it open for current productions to save them from collapse.

Producers hoped to get a decision from the Inland Revenue on Thursday or Friday - but no announcement was made.

"As time drags on, it's becoming more and more urgent," according to Amy Seely of the British Screen Advisory Council.

"I believe some production companies are already laying off staff, which is a disaster. It's the smaller companies that are in particular trouble."

Recent boom

There have been dire warnings that the closure of the loophole would turn Britain into "a no-go area for film-makers" - reversing a current boom in film production.

Last year saw an 85% rise in overseas film spending in the UK.

Films that are forced to scrap UK production could move to another country - but it is likely that many have spent so much money that they would fold.

The government says the closure of the tax loophole was not aimed at the film industry.

Taxing arrangements

The loophole allowed "tax partnerships" to be set up in which investors would put money into a project but pull out before the film made money.

The government says investors went into such projects knowing they would make a loss - and so simply avoiding paying tax on their sum.

Announcing the crack-down on 10 February, Paymaster General Dawn Primarolo said such schemes "undermine the true purpose of tax relief".

But tax relief will still be available for genuine investors, and other tax provisions for film productions, known as Sections 42 and 48, are unaffected.

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