UNITED KINGDOM: Action against perceived abuse of film tax relief

The UK Revenue and Customs announced on 20 December 2005 a plan to introduce legislation to deny film tax relief to investment partnerships by limiting the relief to film production companies. The British film industry had received a boost worth up to ?200m over 3 years – as the Chancellor announced that film tax relief would be extended until 2005.
The targeted scheme attempted to exploit the film tax relief, and is now counteracted by ensuring that partners incur a charge to income tax when they dispose of all or part of their rights to profits arising from a relevant trade (i.e. a trade where film tax reliefs have been used in computing tarding profits and losses) and whether or not they receive consideration for disposing of those rights.