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Last Updated: Monday, 23 February, 2004, 14:43 GMT
Film industry tax 'abuse' blasted
By Ian Youngs
BBC News Online entertainment staff

Jude Law pictured with Nicole Kidman
Jude Law's latest film Tulip Fever has been halted
The government has hit back at the film industry after the closure of a tax loophole sparked outcry from producers and threw many films into disarray.

The tax change has meant some movies being filmed in the UK have lost funds, with producers warning of "disaster".

But the Inland Revenue said it closed the loophole because film investors were "drawing up complex and abusive schemes" to avoid paying tax.

Jude Law's new film Tulip Fever was halted after the loophole was closed.

And Johnny Depp's movie The Libertine, due to start filming on Monday, has been delayed for a week while new financing is found, according to industry magazine Variety.

The government has been consistent in closing these kind of abusive schemes in the past, and will do so again in the future
Inland Revenue statement

The UK Film Council has handed the government a list of 40 films that could be affected, hoping for temporary measures to save productions from collapse.

The organisation said discussions with the government were still going on, and it sent questionnaires to producers to find out how they were affected.

The results would "feature in our discussions with government", a UK Film Council spokeswoman told BBC News Online.

On Monday, the government said it "simply cannot be expected to stand by" while people abuse the tax system at the expense of honest taxpayers.

The government's support of the film industry had been "generous", an Inland Revenue statement said.

"We should not forget that last year, before people started abusing this current loophole, was the most successful year ever for British film.

Johnny Depp
Johnny Depp: His new film The Libertine is in limbo
"The government has been consistent in closing these kind of abusive schemes in the past, and will do so again in the future.

"Closing this loophole does not prevent film-makers benefiting from legitimate film tax relief."

It promised next month's Budget would reveal details of new tax relief to help low-budget films - but that is expected to replace a different tax break being scrapped next year.

Alison Owen, producer of Tulip Fever - which was to have also starred Keira Knightley and Jim Broadbent - has shut down work on the film, cutting 80 jobs.

She told the BBC she could move to the US because it was "too difficult to make movies here".

Some other films have scaled back their productions and are desperately seeking new funding.

Taxing arrangements

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

But the government has said the closure of the tax loophole was not aimed at the film industry.

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

But tax relief will still be available for genuine investors, it added.

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