Gov't may lift TV prod'n out of tax break scheme
New rules to narrow deferrals, prevent abuse
The main areas of concern include the padding of film budgets with phony deferrals, and the widespread use of the tax breaks by TV producers.
New rules, which are expected to be announced in March, could narrow the definition of a qualifying British film to exclude many, and possibly all, TV productions.
The Inland Revenue and the Dept. of Culture, are expected to take a tough line on the level of deferrals they are prepared to accept as part of a legitimate budget.
The film industry has been lobbying hard to clean up the system, in the hope the government can be persuaded to renew the tax breaks when they expire in 2005.
But while there is general accord that the abuse of deferrals needs to be stamped out, there is considerable disagreement over the issue of TV programming.
"There's a real danger, if the Inland Revenue tries to disbar TV entirely, or gets into defining types of TV, that the baby will be washed out with the bathwater," says one tax expert. "We hope they will leave it alone."
Stephen Garrett, an indie producer who, like many, straddles film and TV, argues that the two sectors are so profoundly interlinked, both creatively and financially, that attempting to impose an artificial division between them would be equally damaging to both.
"TV and film producers are not just on the same side --they are the same side," he wrote in a recent letter to the Financial Times. "To argue otherwise is akin to universities saying they don't believe in schools."
But another exec at a company that specializes in setting up sale-and-leaseback partnerships to exploit the tax break is strongly in favor of banning TV programming.
"We get so much product from broadcasters that we don't have enough time to do deals with film producers," he confides. "If they got rid of TV, it would free up the market for real filmmakers."
The tax break -- allowing the entire budget of a film to be written off against tax in the year of production -- was first introduced in 1997, in a move to boost the British film industry.
But the Inland Revenue has been taken about by the volume of TV programming, from soaps and dramas to documentaries and gameshows, which has been funneled through the S&L partnerships, specifically in the past couple of years.
Granada and Carlton, the two big ITV companies, have been particularly aggressive in applying the tax break to their entire production slates.
In the most notorious example, Granada has done sale-and-leaseback deals for its soap "Coronation Street" by defining each individual half-hour episode as a separate "British film."
The tax break has also been applied to the production of movie trailers and commercials.
