Facing a PR backlash over its changes to tax rules this month, the UK government has sought to justify the move by saying that financiers were drawing up "abusive" schemes "at the expense of honest taxpayers."
Although the threatened collapse of major productions such as The Libertine, Man To Man and Tulip Fever has generated plenty of negative headlines, an Inland Revenue statement on Monday said that government tax reliefs were "generous" and would continue to be so.
"We should not forget that last year, before people started abusing this current loophole, was the most successful year ever for British Film. But the Government simply cannot be expected to stand by and let people who are drawing up complex and abusive schemes take advantage of a loophole in the relief and avoid tax at the expense of honest taxpayers. The Government has been consistent in closing these kind of abusive schemes in the past, and will do so again in the future."
The government's decision to clamp down on a tax loophole effectively banned leading schemes including First Choice and Inside Track, which use accountancy write-off principles rather than film-specific relief under Section 48. Although the Treasury has said that the move was not just aimed at film, the high-profile sector has been the centre of a series of articles predicting the demise of British cinema.
Filmmakers are still facing nail-biting uncertainty as to whether the government will grant transitional relief for productions already shooting or deep into pre-production. On Monday, one source said the response from the government so far was "radio silence".
But Monday's statement did re-affirm the Treasury's intention to replace Section 48 with another form of tax support when Section 48 expires next year. The UK Film Council has been lobbying for transferable tax credits similar to those used in Luxembourg.
"Closing this loophole does not prevent film makers benefiting from legitimate film tax relief," said the Inland Revenue. "And as we have always said, the coming Budget will announce proposals on the details of the successor to the existing relief for low budget films to help ensure the ongoing success of the industry."