British film industry hails increased tax relief

The British film industry yesterday welcomed the government's decision to introduce a new tax credit for movies made in the UK.

Under plans revealed yesterday, tax relief will typically provide film makers with 20% of the production budget compared with the 15% they receive under an existing scheme, due to end next July.

The new relief will have no time limit, allowing the industry to make long-term planning decisions.

Sir Alan Parker, chairman of the UK Film Council, said: "The announcement of the new tax credit to support future UK film production will provide much needed certainty for the future with the benefit going direct to film makers."

The new scheme, which replaces the existing relief under section 48 of the Finance Act, aims to bypass film financing firms operating between the Inland Revenue and producers. The government feared such firms could evade taxes.

Yesterday's proposals allow the relief on production costs to be offset against profits or surrendered to the Treasury for a cash payment.

In his statement to parliament yesterday, the chancellor proposed "to transfer the available reliefs for British-made films with budgets below £15m from the third parties, a minority of whom have abused them, and to pay reliefs directly to the film-makers themselves."

Since 1997, support for the British film industry under various relief provisions has added up to £2bn, according to the Treasury estimates.

The number of films made in the UK has doubled since the relief was introduced seven years ago. Films such as Calendar Girls, Bend it Like Beckham, Girl with a Pearl Earring and Gosford Park were all made using section 48 financing.

A record-breaking £1.17bn was spent on film production in the UK last year, while some 50,000 people work in the industry, according to the Film Council.

Estelle Morris, minister for the arts, said the measure announced yesterday "should offer the stability that is needed to further strengthen the industry".

The industry also welcomed government plans to increase distribution of the films both within and outside the UK.

Peter James, managing director of Movision, a film production company, applauded the chancellor's move. "We are very encouraged by Gordon Brown's continuing interest in, and support of the British film industry ... Increasing the contribution to producers by one-third will enhance an already attractive financing structure."

The government is to review the treatment of co-productions, which involve filming in the UK and another country.

The Inland Revenue banned film finance partnerships last month amid fears that bad films were being made as a means of evading tax. Tax losses sometimes exceeded the amount invested.