British Film Indusry Booms, Though Tax Uncertainty Clouds Horizon

by Jason Gorringe, Tax-News.com, London

13 January 2004

The British film industry enjoyed a record year in 2003, when £1.17 billion was spent on the production of 177 films, thanks largely to a system of tax incentives known as Section 48.

The tax break was introduced in 1997, and allows 100% tax relief on the production costs of British qualifying films spending up to £15 million, in addition to 100% relief on script development. Along with certain other benefits, the system has allowed heavyweight Hollywood backers to significantly reduce the risks involved with financing British projects.

In addition, reports estimate that the industry now supports nearly 1,000 firms in the post-production sector, which employ some 15,000 people.

However, Chancellor Gordon Brown has indicated that the present system is to be scrapped in 2005, and although he has pledged continued government support for the industry, specific proposals for Section 48’s replacement have not been forthcoming.

This situation has been criticized by the Commons culture committee in a report last September, which described the preservation of the tax breaks as “absolutely essential” to the long-term health of the British film industry.

"Lead times for decisions about inward investment are long, therefore the Government must end the current uncertainty plaguing the industry, must do so in a positive manner and needs to do so as quickly as possible," the report stated.

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