Cut-price films get tax breaks for another year

Low-budget films are to enjoy existing tax breaks for another year, easing the uncertainty which has dogged the British film industry.

Low-budget films are to enjoy existing tax breaks for another year, easing the uncertainty which has dogged the British film industry.

The move to extend "Section 48" relief from this July to April 2006 means that British movie-makers can press ahead with financing under the current system while negotiations continue on the shape of a replacement system.

Organisations from the Film Council to the Producers Alliance for Cinema and Television (Pact) welcomed the announcement. But they stressed it was a temporary reprieve and were keen to thrash out the details of the new permanent tax credit.

The Chancellor first announced proposals to change the system a year ago and producers warn that there will be a big drop in the number of British productions this year because of the uncertainty.

Tim Willis, the director of film at Pact, said: "The last year has been very tough for producers and of course we are relieved that the immediate uncertainty surrounding Section 48 has been addressed.

"We look forward to the consultation exercise on the new permanent tax credit and we remain hopeful that it will provide the promised 20 per cent benefit to producers."

There was also a cautious welcome to plans for changes to the Section 42 relief, which applies to films with budgets of more than £15m.

The Government made clear its concern yesterday that the current sale and leaseback structures for accessing relief were "inefficient, a target for abuse, make the cost of providing support untenable and might contribute to industry fragility and instability".

It intends to replace the system with a structure similar to the new model for low-budget films - in a move that film insiders suggested could result in a single coherent system. The plan would be for the transition from the current to the new tax reliefs to take place within a year.

John Woodward, the UK Film Council's chief executive, said effective tax reliefs for low- and high-budget feature films were needed to ensure the longer-term viability of the film industry.

But Robert Walters, of BDO Stoy Hayward Investment Management, said it was difficult to understand the impact on the financing of both large and small films after 2006 without seeing the detail of the arrangements.

There was good news for other areas of British culture. An extra £12m will be devoted to skills and leadership training in the arts - a move welcomed by the Arts Council and the Clore Leadership Programme, established a year ago to train future leaders in the arts.

Bodies such as Nesta, the National Endowment for Science, Technology and the Arts, welcomed the announcement of a review into how Britain's creative industries could help the manufacturing sector.

The prospects of companies such as Aga Rayburn, the cooker makers, have been transformed by placing more emphasis on design thanks to a recent Design Council initiative.