Inland Revenue 11

2 July 1997

TAX RELIEF FOR FILM PRODUCTION EXPENDITURE

The UK's standing as a major international centre for
film-making will be boosted as a result of proposals announced
by the Chancellor today to introduce a new tax relief for film
makers.  The new tax relief will allow 100 per cent write-off,
when the film is completed, for production and acquisition
expenditure on British qualifying films costing 15 million
Pounds or less to make.   

The Government's intention is to stimulate the production of
films in the UK and to promote growth, employment, investment
and opportunities in the British film industry.  The proposal
is along the lines of that put forward last year by the
Middleton Committee and by the industry itself.


DETAILS

   1.At present the costs of producing or acquiring a British
 qualifying film can be written off either as the film
generates income or at a flat rate of 33 1/3 per cent per year
starting when the film is completed.

   2.The Government has decided to improve the flat-rate
relief for British qualifying films costing 15 million Pounds
or less to make.  In these cases, the new rules will allow 100
per cent write-off for production or most acquisition costs
when the film is completed. 

   3.The new rules will apply to production costs incurred
after Budget day or acquisition expenditure on films completed
and acquired after Budget day, including films begun before
that date.  The relief will be time limited to costs incurred
during the three
  years from Budget day.   

NOTES FOR EDITORS

   1.Under the existing rules, most production or acquisition
 expenditure is either written-off over the income producing
life of a film, or it is set off pound for pound against
income as it arises.  Alternatively makers of British
qualifying films can claim relief at a flat rate of 33 1/3 per
cent per year when the film is completed.

   2.The Advisory Committee on Film Finance, established in
1996 under the chairmanship of Sir Peter Middleton, was set up
to identify any obstacles to attracting private sector
investment into British film.  The Committee recommended that
a move to 100 per cent write-off would have an immediate
impact on investment in the film industry at a time when the
industry was well placed to make the most of it.

   3.A British qualifying film is one certified as such by
 the Department of National Heritage under the Films Act 1985. 

In order to be certified as a British qualifying film, a
number of criteria must be met.  These include using UK
studios for a high proportion of the film; and ensuring that
the film is made by a company registered, managed and
controlled in the UK or another EU state.  The Department of
National Heritage can provide full details of the other
criteria.

   4.The new measure will be available only in respect of the
costs of production or acquisition of qualifying films.  It
will not apply to audio tapes and discs or to non-qualifying
films.

   5.The new measure will bring forward the time at which
relief is available, reducing the lag between expenditure
being incurred and relief being received.  It will be built
into the existing legislation for British qualifying films
which is found at section 42 of Finance(No2) Act 1992.

   6.Inland Revenue Statement of Practice 1/93 will be updated
in due course.

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