According to the Budget of 17 April 2002, provisions allowing television productions to qualify for UK tax relief are to be changed with immediate effect. There had been growing concern within the Government about the volume and type of project that has been qualifying for the tax relief. Therefore, in an effort to confine the availability of tax concessions to the film industry, the definition of a ‘British’ film is to be amended to exclude television projects.
Tax relief will be restricted to ‘films intended for theatrical release at the commercial cinema’. The proposed changes will also restrict tax relief to production expenditure which has been paid at the time the film is completed or is unconditionally payable within 4 months of the date the film is completed. This is aimed at removing deferments from the allowable production expenditure.
Films completed on or after 17 April 2002 which are not intended for theatrical release will not be eligible for relief nor will those completed on or before 1 January 2002 which have not been certified as British by the DCMS by 17 April 2002. These changes are with immediate effect. There will be no transitional period. This will have a severe impact on television projects currently in production and whose financing relies on a sale and leaseback being concluded.
The proposed changes remain subject to discussion between the Government and the industry in terms of implementation so there may yet be scope for some compromise. The UK producers’ body, PACT, is ‘investigating … what negotiations may be possible’ such as whether certain ‘high end’ dramas may still qualify and whether a period of grace might be available.
We can expect there to be a fair amount of lobbying by producers, PACT and others in respect of the proposed changes.