UK qualifying films will be able to access 20% of their budget in tax-related support under dramatic new rules unveiled by UK Chancellor Gordon Brown in today's (March 17) budget.

Replacing tax-based support under Section 48, the new system will offer filmmakers a credit or rebate worth 20% of budgets that they can offset against profits or surrender to the Treasury for a cash payment. The system will launch next year, when Section 48 expires.

The move is aimed at cutting back the role of the film schemes and other intermediaries, some of which the Chancellor said were abusing the system. Under the new rules, film-makers will no longer to need to go through a partnership of wealthy investors; instead they can go straight to the government and collect 20% of the budget.

Martin Churchill, editor of the Tax Efficient Review, said that the new rules were "virtually the death knell" for the film schemes that act as middlemen. "The new system is a very smart move, it is targeted straight to where it is needed," he said.

"We will have to reinvent ourselves," said the head of one major UK film scheme. "It is good for the film industry, though, and I suspect we will move more into the production end of the business."

The 20% figure represents a 5% rise on the amount available through a traditional sale and leaseback scheme under Section 48, although a lot less than some of the production equity schemes offer. Producers body PACT welcomed the move, pointing out that the new relief will not be time limited like Section 48.

"No British government has ever introduced a tax relief for the sector without an expiry date attached," said John McVay, chief executive. "It will bring much needed stability into the business."

Ronnie Planalp, PACT's director of film, added: "With the expiration date of Section 48 looming, this has been an uncertain time for British feature film producers. The concept of a 20% relief that solely benefits the producer is great news. We look forward to working with government over the forthcoming months to refine the detail of the mechanism."

The sentiment was echoed by Marc Samuelson, deputy chairman of the British Screen Advisory Council (BSAC), which has been lobbying for a so-called son of Section 48 with PACT and the UK Film Council. "We are delighted that the Chancellor has confirmed the Government's continued commitment to the UK film industry, as sustained fiscal support and stability is crucial to the sector's growth and survival," he said. "We believe that today's announcement will demonstrate to the global film industry that the UK remains a film-friendly and competitive environment in which to make films."

Although the news marked a significant victory for lobbyists who had been worried about the government refusing to grant any further relief at all, the lack of detail was still worrying some, however. Over the next few months, the UK Film Council, BSAC and PACT will work with the government to hammer out the details, which the government said will be published in the summer. At press time, for example, it was unclear whether tax relief would be extended to distribution. Support body the UK Film Council had been pushing hard for support for both production and distribution, but the government said only that it would consider the scope for the new relief to be extended to distribution.

"Extending the scope of the new tax credit to distribution would provide a major boost to the UK film industry, helping to ensure that many more people get the chance to see British films both at home and abroad," said Alan Parker, outgoing chairman of the Film Council. "We look forward to discussing with government how we can make that happen."

In another move aimed at tightening up the sector, film schemes will have to register in advance with the Inland Revenue. That should avoid some disasters such as last moth's clamp down on GAAP funds, although many schemes are now expected to continue working in the film sector by using different forms of tax-based funding.

Section 42, which grants relief over three years, was left unaffected and has recently seen companies such as Future FilmGroup stepping up activities. Other schemes are still using generally accepted accountancy principles to underwrite p&a costs for US studios. The latest entrant is to believed to be Ingenious Media, which is understood to be linking up with MGM in a £50m deal.