UK Film Tax Incentive Scheme Approved By EC

by Ulrika Lomas, for LawAndTax-News.com, Brussels

24 November 2006

The UK's new film tax incentives scheme on Wednesday received formal state aid approval from the European Commission, allowing the Government to bring the new film tax regime fully into force, and providing certainty on the details of the new scheme for filmmakers.

The new film tax incentives were announced by Chancellor Gordon Brown in Budget 2006, and deliver targeted and effective support to film production companies, demonstrating the Government's commitment to the sustainable production of films in the UK.

The Department for Culture Media and Sport also this week announced changes to the 'cultural test', which identifies culturally British films and acts as the gateway for the new film tax incentives. The changes ensure that all films eligible for enhanced tax relief continue to be identified through a transparent and objective cultural test.

The Government wishes to provide full clarity to the industry on the treatment of films currently in production and that of future productions. The Treasury has therefore announced that the new films tax incentives, along with the revised cultural test, will apply from 1 January 2007.

Paymaster General, Dawn Primarolo MP explained that:

"State aids clearance of the new film tax incentives allows the Government to provide the certainty that filmmakers require to build this generous incentive into their production plans."

"The introduction of the new incentives underlines the Government's ongoing commitment to the British film industry, and I look forward to the positive impact the new tax regime will have on UK film productions. We have already seen an increase in the number of productions in the UK and the new film tax relief will play a significant role in the ongoing success of the British film industry."

The Government has pledged that there will be no gap in the provision of film tax incentives pending the full implementation of the new regime. Section 42 relief for films will therefore be extended to the end of this year.

The new film tax incentives will deliver the following rates of relief to the producers of culturally British films:

• Films with a budget below £20m are entitled to an enhanced deduction of 100% of their UK production costs and to surrender losses for a payable credit, worth 25% of up to 80% of the qualifying production costs.
• Films with a budget above £20m are entitled to an enhanced deduction of 80% of their UK production costs and to surrender losses for a payable credit, worth 20% of up to 80% of the qualifying production costs.

The new film tax relief applies to:

• UK production expenditure;
• incurred by a film production company;
• on a culturally British film, as determined by the cultural test.

Recommended