Chancellor Relaxes Tax Clampdown on Films
Sale and Leaseback Deals Spared Noose
More than 90 Movies Could be Saved
The British film industry breathed a collective huge sigh of relief this week when, on Wednesday, the U.K. government excluded film sale-and-leaseback deals from its latest tax clampdown, announced last Friday. Film industry leaders have been lobbying furiously for this U-turn since Friday, when the government announced a sudden change in tax rules with immediate effect.
The change was meant to shut down tax-avoidance schemes across a wide range of industries, but a side effect was an immediate halt to sale-and-leaseback deals on more than 90 British films completed in the second half of 2006, including "Casino Royale," "Fred Claus," "Hannibal Rising" and "The Queen." U.S. studio movies and many Brit indie pics were affected.
Producers, financiers and studios found themselves facing an unexpected shortfall of between 9%-16% in budgets and the effects of this were expected to reverbrate to affect every part of the production business.
The government's new decision, to exempt sale & leaseback deals using the old Section 42 and Section 48 tax relief schemes from this latest clampdown, is a clear indicator that the UK Treasury was unaware how devastating the impact would be on Britain's film business.
John Woodward, chief exec of the U.K. Film Council, said, "This clarification is great news and welcome reassurance for the film industry. The government has moved really fast to put an end to uncertainty that a number of films would lose their funding under sale-and-leaseback arrangements. Confidence is now restored across the industry."
Altogether more than 90 films were still in the middle of complex legal and financial processes needed to complete S&L deals.
Although S&L deals have won a reprieve, so-called GAAP funds are still outlawed by the anti-avoidance rules announced last week.
Full story in Variety