LONDON — The U.K. has unveiled plans to abolish in 2006 its tiered system of film tax relief, to be replaced with a unified regime of tax credits for big-budget studio pics and low-budget indie projects.
The news, announced by Chancellor of the Exchequer Gordon Brown in his annual budget statement Wednesday, was greeted with qualified relief across the British film community.
It means that Section 48, the tax break for British movies under £15 million ($28 million), will not expire in July as previously announced but will continue until March 31, 2006.
This will give the government more time to consult the industry on a workable structure for the new tax credit.
Producers had feared that Brown would rush a half-baked version of the tax credit into existence this summer.
At the same time, the government has decided to abolish next year Section 42, which is widely used by Hollywood studios to finance movies above $28 million, and replace it with a similar credit.
The new incentive is intended to be worth 20% of budgets for smaller films. But the government hasn’t made clear whether it will deliver the same value for bigger movies or be capped at a lower level.
At the moment, S42 is worth around 8% of budgets, compared with 15% for S48. But this is generally regarded as insufficient to attract big Hollywood projects to shoot in the U.K.
“What the studios want is certainty and value, in that order,” said John Graydon, of accountancy firm Tenon Media. “The certainty has been delivered by this announcement, but the value is to be confirmed. But the current level of Section 42 probably isn’t enough for many people.”
“The last year has been very tough for producers, and of course we are relieved that the immediate uncertainty surrounding Section 48 has been addressed,” said Tim Willis, of producers org Pact. “We look forward to the consultation exercise on the new permanent tax credit and we remain hopeful that it will provide the promised 20% benefit to producers,” he added.
“This is terrific news for the British film industry and allows the U.K. taxpayer to invest with confidence in U.K. film production for at least one more year,” said Paul Brett of tax fund Prescience Film Finance, speaking on behalf of the new Screen Financiers Assn.