Companies involved in the production of films for TV or straight-to-DVD movies received a boost in Gordon Brown's Budget.
Under current rules set out in the Finance Act (FA) 2006, firms making films for cinema and TV are affected by their own tax agendas; each film is treated as a separate trade taking into account costs and income from the film.
In addition, Schedule 5 of the Act then provides additional tax relief to firms making British cinema movies.
However, under new rules set out in the FA 2007, currently awaiting Royal Assent, companies will be able to apply to opt out of these rules and be taxed instead under general rules applying to most companies.
HM Revenues & Customs spokesman, David Harris, says he expects the option to be used mostly by companies not making productions for the cinema, as they do not get the added benefit of Schedule 5.
“This is a positive change,” he says.
“If these firms decide to take the new option, they wouldn’t have to follow the rules of other production companies.
“We think it will be used mostly by firms which are not making cinema films. These are firms that aren’t getting the benefit of the additional tax relief measure under FA 2006.”
In order to opt out of the tax rules, firms must make an election as part of their tax returns.
The measure can be used when the Finance Bill 2007 receives Royal Assent.
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