Section 35 relief skewed to assist budget films

TAX relief on investments in films will be continued for a further three years but the relief available has been modified in the 1996 Finance Bill.

In addition to the reductions in reliefs signalled in the January Budget, two further changes were announced in the Bill.

The latest changes are aimed at spreading filming more evenly throughout the year and helping film companies making low budget films.

Under the first of the two new measures announced yesterday, the maximum level of qualifying expenditure eligible for relief can be increased by 10 per cent if the main filming takes place in the off season - between October 1st and January 31st.

This 10 per cent will be added to the following limits on the maximum level of expenditure which qualifies for relief:

. up to 60 per cent of the total cost of films with budgets of £4 million or less;

. up to 50 per cent of cost where budget is between £4 million and £15 million;

. up to a maximum of £7.5 million where budget is over £15 million.

One film company source maintained last night that this additional relief would not be of much benefit to film companies because of the difficulties of filming in Ireland in the October to January period.

The second new measure allows corporate investors to invest up to £4 million annually in addition to their existing £2 million annual limit as long as the additional investment is made in projects with budgets not exceeding £4 million. Of this £4 million, investors must not invest more than £2 million in any one project. This is aimed at helping small budget films.

In its original form, Section 35 relief allowed investors in films made in Ireland to deduct the full cost of their investment from their taxable income.

Under the changes introduced in the 1996 Finance Bill, investors will now only be able to claim relief on 80 per cent of their investment at their marginal tax rate.