24/11/2006

Relief, surprise and sometimes anger were the various reactions of UK professionals following yesterday’s approval by the EC of the UK’s new film tax scheme with its revised Cultural Test. “It is good news in the sense that we’ve got something now to work with and the tax situation is no longer in limbo”, said Michael Kuhn (Qwerty Films). Tim Willis, director of film for the UK’s leading film producers association PACT also commented: “It’s a relief for everyone that the tax relief can now become a reality. The new system potentially provides a real cornerstone to establish the conditions for a sustainable production sector.”

The trade body also welcomed the transitional arrangements announced by the Government yesterday morning, giving clearer indications on how producers will be able to access (or not) tax incentives until the final approval of the new tax scheme by the UK Parliament at the end of the year and its implementation by January 1, 2007.

The first good news for everybody is that the current Section 42 tax incentive has been extended to the end of the year. It is now available to films that started filming before January 1, 2007 and are completed by that date (providing they meet the relevant conditions), as well as to films unfinished by that date that failed to pass the new cultural test.

UK co-productions (including all those made under the European Convention) will have access to the new film tax relief as defined by the Finance Bill last April (20% tax credit to films with budgets under £20m and 16% tax credit for films with budgets over £20m), providing they meet the relevant conditions (including spending a minimum 25% of their budget in the UK).

However, non-qualifying European co-productions will have to pass the revised Cultural Test, totally different from its original version, an issue that has provoked surprise, even anger amongst UK film professionals.