British Film Production Falls Away After Tax Crackdown

by Robert Lee, Tax-News.com, London

25 January 2005

The number of films made in the United Kingdom during 2004 fell by almost half after the government tightened legislation to prevent financiers from exploiting a tax loophole.

According to reports, the number of British film projects started last year fell to 27, 44% less than the 44 film projects which began production in 2003. The total spent declined to £117.8 million in 2004 from £269 million the previous year.

Moreover, there has also been a reduction in the number of British and American co-productions, from over 100 in 2003 to 81 last year.

The decline in productions choosing to locate in the UK has been largely attributed to the Inland Revenue’s move last February to prevent the manipulation of trading losses for tax purposes, shutting off a considerable source of funding for the industry in the process.

One high profile victim of the change was ‘The Libertine,’ which was saved by additional funding and the transfer of production to the more tax-friendly Isle of Man.

However, many film projects, including ‘Tulip Fever,’ which starred Jude Law and Kiera Knightly, were forced to suspend production and search for alternative backers.

Reports suggest that the uncertainty surrounding the british film industry may continue in 2005, especially as established industry tax incentives, known as Section 48, are due to be replaced by a new system in July.

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