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New U.K. Tax Credits Win Kudos

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LONDON -- A new-look system of tax credits for U.K. film production was welcomed by some sectors of the industry after its unveiling Monday by the government.

After months of consultation with the industry, the bottom line for producers is that tax relief will be available to filmmakers at a net rate of 16% for movies with budgets of £20 million ($34.8 million) and over.

For films budgeted at less than £20 million, the relief available stands at a net value of 20%. Both rates apply only to the U.K. expenditure of a film's budget.

Chancellor of the Exchequer Gordon Brown delivered his prebudget report Monday to a packed Parliament.

"After consultation with British filmmakers, I can announce a new film tax credit to support British films, increasing support directly for producers, so we can guarantee credit worth 16% for large-budget films and at least 20% for small-budget films," Brown said in his speech.

The small print in the prebudget report indicates that large-budget films will receive "an enhanced deduction of 80% with a payable cash element of 20%, amounting to a benefit typically worth 16% of qualifying costs."

Small-budget films will receive an enhanced tax deduction of 100% with a payable cash element of 25%, amounting to "a benefit worth at least 20% of qualifying production costs."

Brown also said that for qualifying co-productions spending at least 40% in the U.K., this represents a benefit of "at least 10% of total costs."

Film production companies will be able to access this support when the new tax incentives come into effect April 1.

Government-backed industry body the U.K. Film Council "applauded" the new tax credit system. Council chief executive John Woodward described the Chancellor's plan as "the best news the British industry has received for five years."

Said Woodward: "The U.K. has one of the most highly skilled film work forces in the world and last year film production contributed £3.1 billion to U.K. gross domestic product. The new tax regime will support everything from big-budget films such as "Harry Potter" to lower-budget British comedies and thrillers, as well as films from auteur directors such as Ken Loach, Michael Winterbottom and Mike Leigh."

Producers body PACT also reacted favorably, "warmly welcoming" Brown's proclamation.

Said PACT director of film Tim Willis: "We are pleased following the extensive consultation period between the Treasury and the film production sector that the government has delivered both on its original commitment to provide a generous net benefit of 20% to producers, and to deliver a level of benefit to large-budget films that should encourage them to keep coming to the U.K."

The Department of Culture, Media and Sport also issued its guidelines for the new Cultural Test for British film, which movies will have to pass to gain access to the new regime (HR 7/29).

The checklist includes whether or not the cast, crew or producers are British and if the cultural content of the movie includes British elements.

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Stuart Kemp writes for The Hollywood Reporter.

For more news from The Hollywood Reporter, click here.

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