With the UK's new film tax credit set to go into effect April 1, the government has finally provided details about its new tax regime.

Producers say there's good news and bad news in the details.

Unlike its predecessors, the Section42 and Section 48 regimes, the new relief will only apply to a film's UKexpenditure. But there has been a strong welcome that the qualifying threshold has been reduced to decision to 25% minimum UK spend rather than the 40% proposed by the government last year.

But many say that the definition of what constitutes UK spend is too narrow in order to meet European Union State Aid restrictions.

The government has nowdefined qualifying UK spend as "that directly incurred in relation topre-production, principal photography and post-production activities which takeplace within the UK." Spending on development, distribution, and marketing will notqualify.

Producers group Pact notedthat it planned to lobby the UK government and the European Union to loosen therestrictions.

Some producers also saidthey hope to see even more detail. And the Department of Culture Media & Sport's new cultural test forBritish Film, which was also announced in December, has yet to provide itsfinal guidelines.

As announced in December,the benefit was higher than expected (net 20% for low-budget films costing £20mor less and 16% for higher-budget films) and will be used only by film production companies, not other types of investors.


Andy Paterson, Archer Street Films

"It's better to have somecertainty now, at least we can get going. Finally we have something which is the basis for producers to build theirbusiness."

That certainty makes it worth the wait for details, he suggests. "It's better to get it right for producers than to rush it. Everybody whocould shoot by March 31 now has thecertainty to get moving with films shooting for the rest of the year."

The concern remains the government's definition of UK expenditure, which only applies to pre-production, production,and production activities that "take place within the UK."

That means if a UK-financedfilm with a UK cast and UK crew moves to a foreign country for part of itsshoot, that part of the production won't qualify for the new tax regime.

"We would want to see Britishcrews working overseas to count as British spend," says Paterson, who iscurrently putting together a British film that would have part of its shoot inThailand.

"We need to join forces toextend the definition of production expenditure so that it can work forco-productions. I think the European Union, by trying toprotect its member states will ironically give the bulk of the credit to theAmericans, and that cannot be their intention. We have to challenge the EuropeanUnion's ruling on this."

Andrea Calderwood, managing director of Slate Films and vice chair of film at Pact

"The new tax credit shouldprovide a real benefit to producers, which clearly reflects the Government'scommitment to the sustainable production of British films. However, we are concerned that the effect of EU regulationsin this case may seriously endanger the prospects for British and European productions, while giving maximum tax advantages to US studio productions. We are sure this is not the effect that either the UK Government or the EU intend and we hope to work constructively and urgently withthem to address this anomaly."

Rebecca O'Brien, Sixteen Films

"The spirit behind it is wonderful, the idea of making the Britishfilm industry more sustainable. We've all been in a bit of limbo while waiting for clarification on all thesethings," O'Brien says.

The devil is in the detail, she suggests, particularly for smaller Europeanco-productions. "We are worriedparticularly at the low budget end of things. It needs to makesense for the low-budget films particularly because that's what will make theBritish film industry more sustainable."

O'Brien, who is about toseek funding for Ken Loach's next film, says, "by the time I'mlooking for the money, films will have already gone through this new tax systemand it will be easier to cash flow everything."

What she is hoping for is greaterflexibility to make the credit attractive to European partners.

Pippa Harris, Neal Street Productions

"My first reaction is that it seemed to be good news, just in terms of getting some clarity. It's not that much different than we had been expecting. Just having it in our hands is agreat step forwards." Harris says the 25% minimum spend threshold was "good news thatwill make things potentially easier for some productions."

Peter Watson, CEO Recorded Picture Company

"It's an amazing step forward because it gives producers real equity in our films. On the whole it's very positive.""[The definition of UK spend] makes it difficult for producers like us, who while based in Britain, try to make filmsthat tell international stories. This would preclude us from bringing British crewsto location shoots abroad. I know the intention is to recharge Englishfilmmaking, but if they don't address the anomaly, it will be a blow to Britishfilmmaking."

Clarification is necessary, he said. "It would be wonderful if thegovernment could establish a Statement of Practice to say exactly how themechanisms are going to work, until then it's still theoretical."