Tax central to ‘crisis’ in UK film industry

One of the UK’s most respected film producers, Michael Kuhn, has called for the continuation of Section 48 of the Finance Act, saying that its exploitation as a tax loophole has now largely been stopped.

Link: Tax reform forces film production down

Speaking to members of the independent film sector at the Pact Film Lecture in London, Kuhn said the UK faced the ‘bleakest prospect’ since the 1980s, and called on the government and the UK Film Council to help stave off the crisis.

Section 48 is due to be axed in July, following government claims that it has become a loophole whereby wealthy individuals can offset their film investments against tax – regardless of whether the film actually goes into production.

But Khun, a former British president of PolyGram Filmed Entertainment and current chairman of Qwerty Films, said the difficulty of funding films without studio backing, access to lottery funds or other industry funds meant the industry relied heavily on such tax regimes.

‘As many of these sources of funding are expiring or are themselves dependent on tax regimes, there is less equity about. So the hour is dark. Darker, I think, than in most years in my lifetime,’ he said.

Chancellor Gordon Brown has announced draft legislation that will replace Section 48 with a new tax relief system, which will fund 20% of production costs for both low and big budget films. However, this will not become effective until April 2006.

Khun also called for further measures to support the film industry, including the reform of the Film Council, a levy on cinema-going (which was abolished in the 1980s) and a pledge from TV broadcasters to screen more British-made films.

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