Tax relief to ensure that more big-budget television programmes such as Downton Abbey are made in Britain will be announced in the Budget next week.
George Osborne will extend to "top-end" TV productions a tax regime similar to that enjoyed by the UK film industry which, in the 2009-10 financial year, secured almost £100m from special tax allowances. They helped to secure £1bn of investment in more than 200 films, which contributed £4.2bn a year to the economy.
Britain's "cinematic TV" industry, which includes more than 1,500 production companies and is worth over £2bn, is second only to the United States as an exporter. But the Chancellor is worried that the TV blockbusters are increasingly being made in countries with more favourable tax systems.
Unlike Downton Abbey, the vast majority of TV dramas with budgets of over £1m an hour are being made abroad. Titanic, written by Downton Abbey creator Julian Fellowes, was produced in Canada and Hungary, and Tom Stoppard's adaptation of Parade's End was filmed mainly in Belgium.
America has also seen a substantial amount of television production head overseas.The proportion of shows on HBO, the US network which has been home to hits such as The Wire and The Sopranos, which are produced in countries offering tax relief, has risen from 10 to 85 per cent.
A Treasury source said: "One of the ways the world sees Britain at its best is through world-class films and TV made in Britain. They not only help us showcase the country but are also an important part of a dynamic and diversified economy. Tax relief for British films has been critical in ensuring that the industry continues to thrive."
Lord Fellowes, who was made a Conservative peer in 2010, said: "British TV is second to none, but unfortunately, great British programmes are being made overseas where the tax climate is more favourable. If the Budget can address this, it would be a fantastic move forward for our industry."
Mr Osborne joined two Downton Abbey stars, Hugh Bonneville and Elizabeth McGovern, at the lavish state dinner for David Cameron at the White House on Wednesday.
Althoughthe Chancellor will have little spare money for giveaways in next Wednesday's Budget, he wants to use it to boost Britain's creative industries as part of his drive for economic growth. Officials estimate the British film industry would be 75 per cent smaller without the tax relief it enjoys. This is aimed directly at film production companies for the expenses they incur on the production of a film intended for release in commercial cinemas. It must be certified as British, either by passing a cultural test or under an agreed co-production treaty, and must incur at least 25 per cent of total production cost in the UK. Limited-budget films (£20m or less) are eligible for a 25 per cent rate of relief on production costs, while films with a bigger budget are eligible for 20 per cent relief, up to a maximum of 80 per cent of the film's budget.
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