Film Industry Fears UK Government May Not Extend Section 48 Relief

by Robert Lee, Tax-News.com, London

01 May 2003

A recent statement released by PACT, a British trade association representing the commercial interests of the independent TV and film industry, has warned of concerns that the Section 48 tax relief mechanism for film production may not be extended beyond 2005.

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, this has allowed investors to significantly reduce the risks involved with backing film projects.

Whilst the Film Council lobbied successfully to have the tax incentive extended in 2002, it is thought that abuse of the Section 48 incentives by a minority of producers using the tax breaks to finance overseas productions with little British input is influencing the government to reconsider the validity of the scheme.

"The tax incentives have been instrumental in offsetting some of the risk associated with film investment," PACT's vice-chair for film, Margaret Matheson commented to Screen Daily, continuing:. "In particular, Section 48 has attracted investors to the sector allowing a critical number of indigenous films to be made. It’s important to maintain this level of production from which many films have achieved commercial and critical success."

Chief Executive of PACT, John McVay concurred, observing to Screen Daily that the government "has a vital role to play in creating the right environment for the industry to continue to mature both creatively and economically. The next phase of the Government’s policy for a sustainable film industry should be to help create a more stable and better capitalised indigenous film sector."

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