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1997 Finance (No.2) Act

How Tony Blair's first government introduced tax breaks for filmmakers

Main image of 1997 Finance (No.2) Act

The Section 48 Finance (No 2) Act 1997 was passed shortly after the election of Tony Blair's first New Labour government, and introduced new rules for writing-off production and acquisition expenditure of British qualifying films costing £15 million or less to make. The relief applies to expenditure incurred between 2 July 1997 and 1 July 2000 (the latter date subsequently extended to 1 July 2002). Section 48 allows 100 per cent write-off for production or acquisition costs when the film is completed. This was an attempt at addressing concerns that had frequently been raised by British film producers, who found themselves frequently having to work abroad thanks to the lack of tax breaks available from the British government.

A British qualifying film is one certified as such by the Department of Culture Media and Sport under the Films Act 1985. In order to be certified a number of criteria must be met. These include the requirement for the maker of the film to be a UK/European Economic Area company and the requirement for a certain percentage of labour costs to be spent on UK/EEA nationals. The prohibition on using a foreign studio was relaxed in 1999.

The Inland Revenue made an announcement on 25 March 1998 that the Government intended to extend the time limit for relief under section 48 from 3 years to 5 years in a future Finance Bill. The relief will then apply to expenditure incurred between 2 July 1997 and 1 July 2002.

The full text is available on the Office of Public Sector Information (OPSI) website.

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