Tax loophole pours millions into TV soaps

Big bother - Reality TV and established peak-time shows are cashing in on incentives intended to help the ailing UK film industry

The makers of some of Britain's most popular television programmes are receiving tens of millions of pounds from a government tax scheme set up to revive the country's flagging film industry.

The makers of some of Britain's most popular television programmes are receiving tens of millions of pounds from a government tax scheme set up to revive the country's flagging film industry.

Coronation Street, Emmerdale, The Bill and Ground Force are among a huge array of top-rated soaps and entertainment shows that are exploiting a loophole in legislation designed to help struggling independent producers make their first movies. Other series cashing in on the concession include Cold Feet, Casualty, Heartbeat and the comedy quiz They Think It's All Over.

Although the scheme has been used to fund such acclaimed movies as Billy Elliot and the new period drama Gosford Park, more than half of the £200m that it cost the Inland Revenue in its first four years related to TV programmes.

In 1999-2000 alone, £21m of the £65m raised from financiers lured by the concession flowed into the coffers of television companies, according to figures revealed by the industry journal, Screen Finance. And of the 900 productions given permission to make use of the break last year, only 13 per cent were movies.

While the tax break was never aimed at television producers, in practice they have found it easy to access because of the hazy legal definition of what constitutes a film.

Now ministers have launched a wholesale review in a bid to curb the escalating costs and address claims by the film industry that it is being routinely abused. The scheme, which was introduced in 1997 and takes the form of a complex sale and leaseback system, applies to productions with budgets of £15m or less.

Peter Bazalgette, the creative director of Endemol UK, whose hit TV shows include Big Brother, used the tax break to fund the most recent series of the garden makeover show Ground Force. He argues that independent TV producers are as much in need of assistance as filmmakers, and any attempt by ministers to remove their right to access the tax break could threaten the sector with ruin.

"I'm all in favour of helping the film industry but I'm not in favour of helping film to the exclusion of TV," he said. "Tax relief helps us with our margins and by doing so, it enables us to create a more original product."

Talkback Productions has used the tax break to finance entertainment shows such as They Think It's All Over, as well as last year's wartime drama Sword of Honour and Burnside, a spin-off of the police drama The Bill. A spokesman said the concession helped television companies to diversify into film production.

However, a senior film industry insider said that the main objection was to the use of the tax break to fund cheap reality-TV and long-running soaps. While, in theory, it is impossible for a series lasting more than a few episodes to access the concession, producers of shows such as Coronation Street have managed to get round this by certifying individual episodes as separate films. He said: "We are increasingly concerned that television's use of the system goes against the intention for which it was devised, and may jeopardise its future and with it the future of the film industry."

A Treasury spokeswoman confirmed that the Government was considering tightening up legislation. "We are aware of concerns and are already looking into this," she said. "We want to ensure that film tax relief is used specifically for its intended purpose."