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Angels have wings clipped in film tax relief reforms

by Amanda Newman

The Chancellor has effectively confirmed the end of s48 film partnerships in the pre-Budget report following formal approval of the new film tax regime by the European Commission.

The new regime was announced in the 2006 Budget and will replace tax relief to private investors with a tax credit to film producers of “culturally British films” with effect from January 1, 2007.

The Chancellor has announced that the existing s42 tax relief will be extended until December 31, 2006 to ensure there is no gap during the transition period.

Under the new regime, films with a budget below 20m are entitled to 100 per cent relief on their UK production cost, while films with a budget above 20m are entitled to 80 per cent relief and tax credits are available on a percentage of any losses.

Some tax experts believe the changes could make the UK film industry more efficient but others say they will have a negative impact on private investment in the film industry.

BDO Stoy Hayward Investment Management research director David Knight says: “The changes will mean there will not be much available in the way of film investment for private investors.

“What is available will be at a high price. People will need to have a minimum investment of 100,000.

“It will be possible to get access to film investment through one or two enterprise investment schemes that are coming on to the market but they will not be anything like as attractive as film partnerships were.”

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