Thecontroversy over the government's decision to close down film taxloopholes last month erupted in the House of Lords this week.
LabourGovernment spokesman Lord Davies came under fire yesterday as the House OfLords debated the film tax crisis. An array of Tory peers queued up to attacklast month's abrupt decision by the Inland Revenue to close the taxloophole enabling film production schemes to use accountancy write-offprinciples. The UK film industry even found an unlikely ally in the shape ofthe hardline right-winger Lord Tebbit, who called the Revenue's actions'a classic example of the effects of friendly fire.'
In trying to root out an abuse, it was put to Lord Davies by Viscount Falkland,the Revenue had 'caused the termination of about 40 film projects and hasput at risk a number of production companies, with all the hardship thatentails for employment and so on.' Viscount Falkland referred to the'absolute turmoil' the decision had caused.
Lord Davies robustly defended the Revenue's actions, pointing out that'serious abuse' representing £100 million in lost revenue tothe Exchequer was taking place. He stated that 'the Treasury had toact' to stop the tax avoidance schemes and claimed that 'the filmindustry agrees with the position we have taken.'
Filmsupport body the UK Film Council said it is still in talks with the governmentover emergency transitional relief for films already in pre-production orproduction, although some have already given up hope. One tax expert said thatinvestors would already be leaving the funding partnerships that were hit inorder to access tax relief through other schemes before the end of the taxyear. Adam Minns contributed to this story