Government toughens up on Tax relief schemes
by Annika Pham
The UK production sector is likely to be seriously hit by the government's decision to close down some of the country's major tax equity schemes in an attempt to tackle general tax avoidance from different industries.
The Inland Revenue said yesterday it would no longer tolerate "schemes that exploit relief for trading losses from partnerships that individuals may claim against their other income or gains".
The changes to the legislation covering trading losses through partnerships will affect over a dozen production partnerships including the two major tax equity funds in the UK: Grosvenor Park's First Choice and Ingenious Media's Inside Track that were using the "Generally Agreed Accounting Principals" (GAAP) to write off production costs against losses.
Projects currently in production that had used these equity funds will not be affected by the change in legislation effective immediately, but other projects that were set to get financing via those funds before the end of the current 2003-2004 tax year will have to look elsewhere for cash.
Commenting on the Inland Revenue's decision, John Woodward, The UK Film Council's CEO said: "We are scheduling a meeting with the Inland Revenue to discuss the possibility of introducing transitional arrangements to protect films currently going into production where complex co-financing arrangements have been put into place in good faith by bona fide industry investors".
Fortunately for the local film industry, the Section 48 tax scheme will remain in place, at least until 2005 when a new tax relief system for feature films will probably be introduced. "The UK Film Council has consistently argued for specific and tailored tax reliefs for British films and we are now focused on the details of a replacement mechanism for Section 48 film tax relief which was outlined by the Chancellor last November", explained John Woodward. "The Inland Revenue's announcement clearly re-emphasises the need for film specific tax relief which is part of an agreed policy to assist the film industry".
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