Ken Loach's current production, Ae Fond Kiss, has secured just over 40% of its $5m (£3m)budget through UK tax fund Azure.

The funding comes in Azure's traditional form of equity and a traditional sale and leaseback under the UK's Section 48 tax deferral mechanism. The production, the third in Loach's Glasgow trilogy after Sweet Sixteen and My Name Is Joe, started shooting this month.

The project is also backed by Icon Film Distribution, which has all UK rights, along with Loach's regular network of European distributors, including France's Diaphana, Spain's Tornasol and Italy's BIM. Remaining territories are being sold by The Works. Other backers include Scottish Screen and the Glasgow Film Office.

Azure's co-chief Nigel Thomas said that the tax financier came on board through its relationship with Loach's longstanding co-producer Uli Felsberg, with whom the fund worked on last year's short film portmanteau Ten Minutes Older.

Thomas said Azure is "comfortable" currently funding some 30% of a slate of films with a total budget of around $50m (£30m). The fund, which uses a pool of regular investors, is financing three titles from LA-based production company Sandstorm Films along with German equity investors Media Cooperation One GmbH (MCOne). The trio of films is led by the kickboxing action film, The Square Circle.

Thomas, who set up Azure last year with Christopher Cave, said that some of the fund's investors might stay on board even if the Section 48 tax breaks were scrapped in 2005, when they are due to expire. "They have got used to making equity investments in film now," Thomas said. "We actually don't mind what form Section 48 takes, we would just like it to stay the same for longer than six months."

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