U.K. seeks list of periled pix
Gov't unyielding on film fund cutoff
LONDON -- The U.K. government gave little ground Thursday in its first meeting with British film reps over the tax financing crisis that has engulfed the industry this week.
Inland Revenues officials requested a detailed list of movie projects likely to collapse as a result of the sudden and unexpected change in tax law, which they announced Tuesday.
But they gave no clear indication whether they were prepared to grant these projects enough leeway to survive, and if so, where they will draw the line.
Top of the at-risk list is "The Libertine," starring Johnny Depp and produced by John Malkovich and Russ Smith's Mr Mudd shingle. The $22 million pic, which starts shooting Feb. 23, was due to receive nearly a third of its budget from Grosvenor Park's First Choice fund, now outlawed by the change in tax rules.
"It's mind-blowing," Smith commented. "I just came to Britain to make a movie. I didn't know that something that was legal might be made illegal in a second."
Reps of the British Screen Advisory Council, producers' org PACT and the U.K. Film Council spent Thursday scrambling to draw up the list of pics in peril by the 6 p.m. deadline set by the Inland Revenue.
One insider said Inland Revenue officials had been extremely "robust" in defending their decision to shut down the tax loophole that had enabled funds including First Choice and Ingenious Media's Inside Track to raise hundreds of millions of pounds in film investment over the past year.
In an email sent around the industry, Film Council chief exec John Woodward stressed that "there is no possibility of a reversal of the Revenue's clear policy decision to radically limit the operational scope of tax partnerships."
The government announced an immediate cut-off date of Feb. 10 for investments by these now-outlawed film funds. The problem is that around 20 projects are due for production in the next couple of months. They had made financing deals in principle but had yet to nail down the formal contracts. In the meantime, these projects have started to spend significant cash on pre-production.
Film orgs have proposed to the government "that an arrangement should be made so that tax partnership funding still remains available to a film, which is intended to be British-qualifying, where all the financing partners were in place and where expenditure had already been commited by 10 February 2004."
There is no indication whether the Inland Revenue will accept this proposal, but it has invited the industry to submit the details of such films for consideration.
"The optimistic view is that they wouldn't ask for the list unless they plan to do something about it," said one tax financier. "The pessimistic view is that they just want to be seen to be co-operative, but have no intention of actually being so."
The list is likely to include many of the most significant British movies scheduled to shoot in the next few months, among them projects backed by Hollywood studios. The crisis is less acute for studio pics than for indie producers, who will find it much harder to fill the gaping hole left by the closure of Inside Track and First Choice. These funds typically put up around a third of a film's budget.
Funds operating under the U.K.'s Section 48 film tax break are not caught by the change in tax rules. Having been overshadowed in the past year by the success of Inside Track and First Choice, Section 48 funds offered by companies such as Matrix and new player Prescience look set to enjoy a swing back into fashion.
