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The British government today (2.12.04) announced changes in the way in which tax incentives are used to raise funding for film production in the UK .

In today’s Pre-Budget Report the Chancellor announced an end to the practice of ‘double dipping’ on both Section 42 and Section 48, in which tax relief was claimed twice – on both the production and the acquisition costs of a film. There will be transitional arrangements for films which began principal photography prior to 2 December, with the Inland Revenue considering such films on a case by case basis.

Section 42 and Section 48 are designed to stimulate UK-based production of big budget movies (such as the Harry Potter and Bond series’), and smaller, more distinctively British films (such as Bend it like Beckham and Calendar Girls ) respectively. The two incentives have played a crucial role in the development of the UK film industry, with film production spending in the UK reaching an all time record high of £1.17 billion in 2003, and the number of people working in the film industry rising 77 per cent over the past decade, from 32,402 in 1994 to a current workforce of 57,000.

UK film industry representatives and the Inland Revenue are in on-going discussions regarding the shape of a new tax credit to succeed Section 48 from July 2005, and today the government also announced a speedy review of Section 42.

Click here for the government's statement.

John Woodward, CEO of the UK Film Council, commented:

"Film is a highly competitive global industry, and tax incentives are essential to maintaining and developing a domestic film industry in the UK, but we have to recognise that they are a privilege, not a right.

 

Today’s move to end ‘double dipping’ comes as no surprise, and the transitional arrangements for films whose production was supported by ‘double dipping’ is extremely welcome.

 

What the UK’s film industry needs more than anything else is long-term certainty over financing arrangements, which is essential to building and maintaining the confidence of investors in the future. Taken together with the announcement of the new tax credit for lower budget films in the last budget, the decision to review Section 42 means that the days of using unwieldy leasing arrangements to fund film production are thankfully drawing to a close.

 

The Government has made clear its commitment 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 budget tax credit does indeed deliver 20% direct to producers, and that the review of Section 42 results in an incentive which continues to encourage the major overseas investment in our film infrastructure which is so vital to our own home-grown industry."

Published on www.britfilms.com December 2, 2004

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