UK producers body PACT has warned that the UK's influential film tax breaks could disappear completely in July 2005.

While the tax relief mechanism under Section 48 is due to expire in 2005, the film industry is hoping for another extension after lobbying led by support super body the Film Council secured a renewal in 2002. But PACT said in a statement that "there is considerable concern, both at PACT and within the independent production community, as to what, if any, fiscal support will replace it."

Fears have been growing that the Government will decide that the industry has benefited long enough from the breaks, which were introduced in 1997. Many believe that the final straw will be the Treasury's growing alarm over a tiny minority of producers who are widely seen as abusing the tax mechanism by using to it to fund overseas productions with only a minimal UK interest.

PACT's statement, one of the first signs of the intense lobbying expected in the run-up to 2005, comes as industry agencies meet with the Culture, Media and Sport Select Committee, a Government think tank looking at the film sector. The last such committee led to the introduction of the tax breaks.

PACT's statement is also seen as a response to Film Council chairman Alan Parker's criticism of the tax breaks last year, when the director said they were "taking us nowhere" and called for them to focus on distribution as well as production. PACT said that production and distribution should be encouraged to work more closely together, but support for one should not be at the expense of the other.

"The tax incentives have been instrumental in offsetting some of the risk associated with film investment," said Margaret Matheson, PACT's vice-chair for film. "In particular, Section 48 has attracted investors to the sector allowing a critical number of indigenous films to be made. It's important to maintain this level of production from which many films have achieved commercial and critical success."

PACT added that another area that needs to be addressed is the lack of commitment to film from UK broadcasting organisations. The body pointed out that communications super-regulator Ofcom will have the remit to look into this issue once the new Communications Bill becomes law.

"Government has a vital role to play in creating the right environment for the industry to continue to mature both creatively and economically," said John McVay, chief executive of PACT. "The next phase of the Government's policy for a sustainable film industry should be to help create a more stable and better capitalised indigenous film sector."