The UK Treasury has said it is closing 'avoidanceschemes' that exploit tax relief for British film production.
Chancellor Gordon Brown's pre-budget report todayannounced an end to the practice of 'double dipping' on both Section 42 andSection 48 in which tax relief is claimed twice on the production andacquisition costs of a film.
However, the government says that most films alreadyshooting will not be affected. There will be transitional arrangements forfilms which began principal photography before December 2, with the InlandRevenue considering such films on a case by case basis.
The Treasury also said that it was reviewing Section 42, theincentive designed to attract bigger budget films such as the Bond and HarryPotter series to the UK. A Film Council spokesman said that the reviewwould be designed to boost the effectiveness of Section 42 to ensure that theUK remains competitive in attracting big budget shoots.
The Treasury said that it would consult with the UK Film Council and the industry on the review and that it would be carried out by the end of January.
In a press statement, the Treasury said: "The government appreciates the need for certainty, given the long lead times for film production. The review will therefore be taken forward on a short time-scale to the end of January 2005, and the government invites comments from relevant parties on that basis.
In a statement, UK Film Council John Woodward commented:"Today's move to end double dipping comes as no surprise and the transitionalarrangements for films whose production was supported by double dipping isextremely welcome."
He added: "Taken together with the announcement of the newtax credit for lower budget films in the last budget, the decision to reviewSection 42 means that the days of using unwieldy leasing arrangements to fundfilm production are thankfully drawing to a close."
Woodward continued: "The government has made clear itscommitment to the development of a stable and growing film industry in the UK.To put that commitment into effect we need to ensure that the new lower budgettax credit does indeed deliver 20% direct to producers, and that the review ofSection 42 results in an incentive which continues to encourage the majoroverseas investment in our film infrastructure which is so vital to our ownhome-grown industry."
Producers body Pact also welcomed the Gordon Brown's"clarification in the pre-budget report of the transitional arrangements forfilms utilising double claims for tax relief".
A Pact statement added: "Although Pact is disappointed acommonly used financing structure has been removed, we are glad the governmenthas listened to the industry and given due regard to those films that arealready underway."