UK's Loss Is The Isle Of Man's Gain After Shock Inland Revenue Ruling

by Robert Lee, Tax-News.com, London

03 March 2004

The Inland Revenue’s decision to shut down a legitimate tax loophole used by the film industry to help finance productions in the UK could work to the Isle of Man’s advantage after the producers of ‘The Libertine’ decided to switch production to the jurisdiction.

The ruling by the Revenue has caused chaos in the film industry, with dozens of productions halted after the government decided, without warning, that as of February 10 it was bringing forward legislation to “address tax avoidance schemes which exploit relief for trading losses through partnerships,” with immediate effect.

"It was a big blow because we've been working on this film for seven years. To get someone like Johnny (Depp) to do it takes a long time,” observed actor John Malkovich, a co-producer of The Libertine, according to the Daily Telegraph.

"I do have fears for the British industry,” he said. "It's already expensive to shoot films in England because of the strength of sterling. But without these tax incentives…?

"Let me put it in the form of a question: Why wouldn't you in future go to Romania or Bulgaria or Hungary, which are probably a third of the price, and take a few of your key English crew with you?”

The Isle of Man established a film commission in 1995 as a first step towards creating a film industry in the jurisdiction. The authorities have since developed an investment package that gives filmmakers 25% of their budget on the proviso that over half the film is shot on the island.

The incentives have had a small, though growing impact on the island’s film industry. In 2001, the island was location for six films. In 2002 this had grown to eight whilst in 2003 ten producers chose the jurisdiction as a location. Malkovich also marvelled at the unbureacratic approach of the Isle of Man commission.

"The thing about the Isle of Man is that it's a very small group and they can move really quickly,” he noted.

"When I made the deal for Colour Me Kubrick the papers were about a foot high. With the Isle of Man it was a handshake. I just explained the situation during dinner, and 15 minutes later it was agreed.”

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