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Last Updated: Monday, 5 December 2005, 19:26 GMT
Tax change for movies made in UK
Daniel Craig as James Bond
The new Bond film is mostly being shot outside the UK
A tax credit for producers making films in the UK has been announced by the government, with 16% relief for large budget films and 20% for small budgets.

Gordon Brown outlined the plans in his annual pre-Budget speech.

A "culturally British" test which will help determine if films qualify for tax relief was also announced.

It will have a points system measuring where the film is based, where its crew are from and whether it is set in the UK or has British characters.

The tax subsidies currently go to the third parties who fund the films rather than the producers.

Is the production and filming based in the UK?
Do the cast, crew and/or producers come from the EEA (European Economic Area)?
Is the film set in the UK, are the characters British?

Under the new plans, the cash would be paid directly to producers to help cover production costs, on completion of the film. Both large- and small-budget rates apply to the UK spend of a film's budget.

The Cultural Test for British Film was set out on Monday by Creative Industries Minister James Purnell.

Although the test will help determine if a film can qualify for tax relief, the final decision will be made by the Treasury.

Mrs Henderson Presents or Pride and Prejudice could qualify [for tax relief], but so too could Batman Begins - based in Gotham City, but filmed in the UK, employing Brits and using British facilities
James Purnell, DCMS

The current British film definition states that at least 70% of a film's production costs has to be spent in the UK.

Mr Purnell said: "The new test operates around a points system that will focus on cultural content, cultural hubs and cultural practitioners.

"Films which score at least 50% of the total points available will be certified as British."

He added that the test was "not an attempt to dictate the content or subject matter of British films".

The Treasury said its reforms were aimed at sustaining "the UK film industry's reputation for excellence in a globally competitive market".

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The tax relief will be available to film production companies when the new tax incentives come into effect from 1 April 2006.

But the Treasury stressed the new measures were "designed to be robust against abuse and avoidance" and would be monitored closely.

John Woodward from the UK Film Council, said the cultural test provided "a simpler way to assess British films for the purpose of accessing tax breaks".

A scene from Harry Potter and the Goblet of Fire
The fifth Harry Potter film will be made in the UK next year

He said the test would be "more comprehensive" and would mean taxpayers' money will be spent on films that deliver a clear cultural and economic benefit to the UK".

And Margaret Matheson, vice-chair of film at the Producers Alliance for Cinema and Television (Pact) said: "We are happy the new tax credit will provide a real benefit to producers".

Adrian Wootton, chief executive officer of London Film said the tax credit was "fantastic news for the London film industry", adding: "We now have the competitive edge to further extend our position as one of the great production centres of the world."

But last week broadcasting union Bectu said the move would deter Hollywood from making big movies in the UK.

Bectu said: "By limiting the criteria of what defines British film you're opening yourself up to all sorts of problems.

"The fact that the new James Bond film Casino Royale is shooting in Prague is a case in point."

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