One reason, of course, is that filmmaking is a notoriously risky business and raising finance can be difficult. But secondly, and more importantly, the government is keen to grow the British film industry.
The UK has always had some of the world’s best technicians and producers, but there have been relatively few homemade blockbusters.
However, times are changing and, while Hollywood can boast some of the world’s best crew, talent, locations, infrastructure and post-production services, its costs are increasing.
At the same time, the US is facing competition from tax breaks offered by other countries, including the UK. The film business brings in about $20bn (£12bn) per annum in California alone.
However, new governor Arnold Schwarzenegger is faced with a huge budget deficit and will find it difficult to offer any more state incentives to the industry.
The key to the commercial success of films is distribution, but the US studios control both the biggest distribution companies in the UK and most of the cinemas. Producing big budget films requires guaranteed US distribution, so this has to be cracked. Fortunately the UK tax reliefs are successfully stimulating the interest of the Hollywood studios, which are increasingly seeking to co-produce and distribute British films.
Changes to US accounting regulations effective from 2001 have resulted in another opportunity for UK business. SOP 00-2 ‘accounting by producers or distributors of films’ prevents the previous practice of capitalising the printing and advertising costs of a film, and requires an immediate expense to be incurred.
This has had a negative impact on distributor’s accounts. As a result, a new generation of UK film partnerships have arisen seeking to take on, not the production of films, but the business of marketing them.
The combination of tax breaks and the ingenuity of UK film partnerships has caught the eye of the major Hollywood studios, let’s hope our film industry can capitalise on this opportunity.
Does Darwin's theory apply to taxation? Colin ponders...
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