Accountants Slam UK Film Tax Changes

by Robert Lee, Tax-News.com, London

04 July 2002

Chartered accountants in the United Kingdom have warned that fewer British films could be made in the UK thanks to changes in the financing and taxation of such projects.

Chancellor Gordon Brown earlier this year announced his intention to prevent the producers of long-running British soap operas such as Granada's Coronation Street, from reaping the benefits of tax breaks intended for film-makers. The new rules also stipulate that not only must a film be made for the cinema in order to qualify for tax breaks as a 'British' film, it must now have a British writer and director as well.

However, Craig Williams, Chairman of the Chartered Accountants' Entertainment and Media Industry Special Interest Group, announced earlier this week that in addition to reducing the number of films made in this country, the new rules are causing a great deal of confusion:

'The problem is some films are made for the cinema but never actually succeed in getting distribution deals. Instead they go straight to television. The tax changes mean it is unclear whether these films would still qualify for tax breaks,' he argued, concluding that:

'As we are now in a consultation period, potential investors are put off that film projects may end up being made, but will go straight to TV and thereby lose out financially because the Chancellor has withdrawn their tax incentives.'

The provision in question allowed 100% tax relief on the production and acquisition costs of qualifying British films with budgets of no more than £15 million. However, under the previous rules, long-running productions were broken down into £15 million chunks in order to qualify.

UK film producers had warned for some time that such procedures went against the spirit of the government offering, and warned at the time that they could result in the loss of the tax break altogether.

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