Following the UK Treasury's announcement of a review of film tax reliefs in Budget 2005, a consultation document has been published setting out proposals for new tax incentives for the production of films which make a cultural contribution to Britain, a move which has been welcomed by members of the British film industry.
The new proposals are being viewed as a lifeline for the film industry in Britain, which has faced mounting uncertainty after the Treasury decided to scrap the system of tax incentives known as Section 48 because it felt that they were too readily abused by film financiers.
The consultation, known as 'Reform of Film Tax Incentives: Promoting the sustainable production of culturally British films', reflects the Government’s view that more can be done to encourage effective and sustained investment while providing better value for money for the British taxpayer and the film-going public.
The proposed new relief aims to achieve the following:
“This consultation signals the Government’s continuing recognition of the cultural and economic benefits that film production brings to the UK," stated Paymaster General Dawn Primarolo.
"It provides a real opportunity to maximise the role that tax incentives can play towards Government objectives for film by ensuring greater effectiveness, value for money and a better contribution to the sustainable production of culturally British films in the UK," she added.
In parallel, the Department for Culture, Media and Sport today launched a consultation on a proposed objective cultural test for British film.
The test aims to better identify culturally British films that might be considered eligible for the new tax incentives. It will offer filmmakers more flexibility by ensuring that a range of measures – personnel, cultural content and facilities – are given more consideration in assessing whether a film qualifies as British. Under the current system, these issues are considered only indirectly as part of the expenditure tests.Welcoming the Treasury's announcement, UK Film Council Chief Executive Officer John Woodward commented that the new approach to film tax incentives would encourage investment in multiple production projects.
"The consultation proposals represent a totally new approach to tax relief for film," Mr Woodward observed.
He added that:
“The precise value of the new relief will be determined by the way in which filmmakers choose to use it. Where they continue to structure their films in the same way as they do now, the level of benefit will broadly be the same. However, the new reliefs will deliver a bigger benefit when the income from a film is reinvested against future film production."
“This marks a totally new beginning for film tax relief and the coming months of the consultation period will be crucial as the detail of the proposal are worked through."
The closing date for responses to both consultations is 21 October 2005.
A comprehensive report in our Intelligence Report series examining tax-sheltering arrangements for investors, including Film Finance, Forest Finance, Venture Capital, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report5.asp
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