Bedford Row Films, an apparently conventional scheme funding films under the UK's established Section 48 tax deferral rules, has written to investors saying it is 'facing difficulties'.

The company told investors it has made advance payments on a slate of 19 films but has been 'let down badly' by the vendor of 17 titles. In the letter it describes the vendor as 'a regular and reliable supplier of film stock over the years, not only to Bedford Row but to other film partnerships.'

Bedford Row said it was not appropriate to comment prior to a partners' meeting next week, but director David Gates said in the letter that the 'preferred' tax relief may not be secured for this financial year for three of its partnerships.

The letter states that Bedford Row is now 'urgently' looking at alternative investments and may seek relief under Section 42, which grants relief over three years rather 100% in the first year.

The news is another dent to investor confidence, which is already battered after last month's clamp down on tax-based funds by the government. The funds worst hit by last month's ruling were breaking new ground by applying general accountancy write-down rules to film financing. But the Bedford Row partnerships are believed to be conventional schemes using the long established sale & leaseback mechanism under Section 48, the government's film-specific tax support.

Bedford Row's letter says that when the problem first arose it immediately sought assurances from the vendor, and struck a series of agreements to meet its deadlines.

'As the earlier Bedford Row Film Partnerships had been successfully completed and no one could have foreseen these difficulties, no blame should be attached to your advisor,' says Gates in the letter. 'No additional due diligence would have unearthed these problems in advance.'