A complex tax avoidance scheme that uses tax relief relating to film production in the UK is to be axed in the new tax year. The UK gover...

A complex tax avoidance scheme that uses tax relief relating to film production in the UK is to be axed in the new tax year. The UK government will bring in new legislation to be announced in the 2006 Finance Bill to shut down the scheme which combines a film sale and leaseback partnership with a separate but parallel investment partnership. By exploiting anomalies in the existing legislation wealthy individuals have been using the scheme to obtain a tax advantage greater than the amount invested whilst avoiding any taxable income at a later date, the government argues. "This is a particularly aggressive attempt to exploit the current tax reliefs intended to support the British film industry. As we made clear in December's Pre-Budget Report, the government will take swift and appropriate action to counter such abuses of the tax system. We will continue to monitor the use of the existing tax reliefs as long as they are in place," said UK government minister Dawn Primarolo in a statement. The tax relief scheme for British film production will be replaced on 1 April 2006, subject to clearance by Brussels. Under the new relief small budget films can claim a minimum benefit of 20 per of total qualifying production costs, whereas large budget films will be able to claim a benefit worth at least 16 per cent of total qualifying production costs.