In his 2006 Budget report, the UK Chancellor of the Exchequer Gordon Brown confirmed the
Pre-Budget announcement of a new tax relief system replacing
Section 42 and Section 48 from 1 April this year.
The new tax relief system will mean:
- on low budget films (with production budgets up to £20 million), the tax credit level will be 20%
For low budget films, the enhanced deduction will be 100% of qualifying
expenditure and the payable cash element will be 25% of surrendered
losses;
- on higher budget films (with production budgets of £20 million and above), the tax credit level will be 16%
For all other qualifying films, the enhanced deduction will be 80% of
qualifying expenditure and the payable cash element will be 20% of
surrendered losses;
- the level of tax credit applies to the total amount spent within the UK in order to be EU State Aid compliant
State Aid is any assistance involving state resources which favour a
particular business sector. In order to comply with EU law the
European Commission needs to be assured that the relief does not
distort competition between different Member States by giving unfair
assistance to the British Film Industry.
-
the lowering of the minimum UK expenditure threshold from the proposed
40% to 25% allowing more films to qualify for tax relief.
Further details of today’s announcement can be found at http://www.hmrc.gov.uk/budget2006/bn04.htm and http://www.hm-treasury.gov.uk/media/20F/2F/bud06_cha_134.pdf
Netribution expects to publish Adam P Davies, long-promised guide to the new tax regime shortly.
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