Avoidance bandwagon rolls on

Before the Bank Holiday weekend, the Treasury toughened up rules on tax loopholes being exploited by UK film-makers. The new rules order European many film-makers to spend 40% of their budgets in the UK, when involved in co-productions, in order for these films to qualify for tax relief.

With the previous threshold set at 30%, ministers had feared too many productions were taking advantage of the tax regime by shooting films, that would never be released in the UK.

The new threshold follows the media storm that followed the Treasury decision in February to close a tax loophole, used by some film finance partnerships for raising money to fund big-screen productions.

However, that move pales in significance compared to international attempts to crack down on tax avoidance. British tax experts are helping form a task force with the US, Canada and Australia, designed to take on international tax cheats. A new body is now expected to be set up in New York, the result of a plan to fight back against the exploitation of discrepancies in tax avoidance from one country to the next. Its functions will include the identification of avoidance schemes, a pooling of knowledge in how to combat them, and eventually joint action, with schemes designed to prevent taxpayers from playing one country off against another.

On the plus side is the fact that the new regime will not ride roughshod over the UK. With Dave Hartnett, deputy chairman of the Inland Revenue, and Chris Tailby, head of VAT at Customs & Excise, involved in secret talks in Virginia last month, the UK is very much inside the tent on this one.

However, it demonstrates not just the Treasury’s intent to deal with what it considers to be unreasonable tax avoidance, but that its will matches that of other fiscal departments across the world.

Tax advisers and tax collectors may not see eye to eye on this one. But there’s no escaping the facts: tax avoidance may not be illegal but, if it’s large enough, it’s still not going to be tolerated – at home or abroad.


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