UK Film Industry Nervous As TV Companies Hijack Tax Break

by Jason Gorringe, Tax-News.com, London

09 January 2002

According to reports, the UK film industry is becoming increasingly twitchy about the use of a tax relief provision aimed at UK produced feature films, by television companies such as Granada.

Granada produces several long-running drama and childrens television shows, and thanks to the loose definition given by the Chancellor in his 1997 budget of what constitutes British films, is able to take advantage of film tax breaks.

The provision in question allows 100% tax relief on the production and acquisition costs of qualifying British films with budgets of no more than £15 million. However, under the current rules, long-running productions can be broken down into £15 million chunks in order to qualify, which UK film producers feel goes against the spirit of the government offering, and could result in the loss of the tax break altogether.

'We are not going to stand by idly and watch it disappear simply because it's being taken advantage of by television companies,' John Woodward, the Chief Executive of the film industry body, The Film Council, warned.

However, it may already be too late. Although the current tax break is set to run until 2005, concern has been expressed both by the Inland Revenue and the Department for Culture, Media and Sport over the sudden and dramatic increase in applications for Section 48 relief.

Officials from the DCMS are said to be looking into changing the definition of 'British film' when the issue comes up for discussion again in 3 years, in order to prevent widespread abuse of the tax provision by television producers and other media services.

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