[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Thursday, 2 December, 2004, 17:32 GMT
Clampdown on film tax avoidance
Shaun of the Dead
Tax relief schemes aim to promote UK films such as Shaun of the Dead
Chancellor Gordon Brown has tightened up film tax relief schemes, in an effort to stop investors avoiding tax.

His pre-Budget report included steps to prevent investors claiming tax relief on both the production and acquisition costs of a film.

The schemes were originally introduced to promote the production of both big and small-budget British films.

While the move comes into immediate effect, it will not affect UK films already in production.

'Promoting industry'

The Section 42 and Section 48 schemes promoted UK film-making by enabling investors and producers to claim tax relief on either the cost of producing movies or buying film rights.

But the government said investors abused the schemes by claiming both production and acquisition relief, a process known as "double dipping".

Tax incentives are essential to maintaining and developing a domestic film industry in the UK, but we have to recognise that they are a privilege, not a right
John Woodward, UK Film Council

Inland Revenue spokesman Craig Mason said: "The government's main aim is to promote a sustainable UK film industry but this does not extend to deliberate abuses of tax relief."

The UK Film Council said the move announced on Wednesday came as "no surprise".

"Tax incentives are essential to maintaining and developing a domestic film industry in the UK, but we have to recognise that they are a privilege, not a right," said chief executive officer John Woodward.

Undue relief

The chancellor also announced that the incentive schemes can no longer be used to defer tax payment for longer than 15 years.

Further steps prevent trading partners from claiming undue loss relief, and investors can no longer gain tax benefits by leaving a tax incentive scheme early.

Mr Woodward added: "What the UK's film industry needs more than anything else is long-term certainty over financing arrangements, which is essential to building and maintaining the confidence of investors in the future."

We are glad the government has listened to the industry and given due regard to those films that are already under way
Pact - film-makers' group
The pre-Budget announcement followed the government's closure of a previous tax loophole in February, which it said was being abused by people investing in British films.

This put the future of around 40 UK films in doubt as they suddenly lost a share of their budgets, including The Libertine, starring Johnny Depp, and Tulip Fever starring Jude Law and Keira Knightley.

Independent film-makers' body Pact was relieved that the new clampdown would only affect costs incurred from Wednesday.

"Although Pact is disappointed a commonly-used financing structure has been removed, we are glad the government has listened to the industry and given due regard to those films that are already under way," a spokesman said.

"Pact is pleased this will ensure those films that have entered into contractually-binding agreements are able to complete production using both reliefs."

Film London, which promotes the capital as a movie location, had mixed feelings about the announcement.

"We welcome the transitional arrangements offered by the Inland Revenue for films already in principal photography," said chief executive Adrian Wootton.

"Film London is disappointed that a number of films poised to shoot in London in the new year may be severely affected by the lack of further transitional relief."


RELATED INTERNET LINKS:
The BBC is not responsible for the content of external internet sites


PRODUCTS AND SERVICES

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East | South Asia
UK | Business | Entertainment | Science/Nature | Technology | Health
Have Your Say | In Pictures | Week at a Glance | Country Profiles | In Depth | Programmes
Americas Africa Europe Middle East South Asia Asia Pacific