UK producers organisation Pact has welcomedyesterday's European Union approval of the UK's new film tax credits as well as the UK government's announcement of transitionalarrangements from the old credits to the new.

The new tax credit isexpected to take effect from Jan 1, 2007 and the government has extended the old Section 42 tax break (which hadoriginally expired in April) until the end of 2006. The new system will rununtil 2012.

The group said in astatement: "Pact hopes that approval of the new test will provide certaintyboth to independent British filmmakers and to US studios working in the UK."

Pact urges governmentleaders to extend the definition of UK expenditure to include UK staff working overseas, as other EU countries havesimilarly done still with EU approval.

Tim Willis, director of filmat Pact, said: "It's a relief for everyone that the tax relief can now become areality. The new system potentially provides a real cornerstone to establishthe conditions for a sustainable production sector, and we look forward toworking with industry stakeholders to ensure that the tax credit enablesBritish production businesses to maximise their participation in the success oftheir films."