Clause 32
Finance (No. 2) Bill
6:30 pm
Edward Balls (Economic Secretary, HM Treasury; Normanton, Labour)
Or may not be. We will be able to cover all of the issues that are relevant to the clause as a whole. I will take them in a different order because they fall into a number of discrete groups. Amendments Nos. 31, 32, 64 and 65 are about change in the definition of a film production company for the purposes of the chapter. Amendment No. 34 seeks to widen the base upon which film tax relief will be provided. AmendmentNo. 47, which we referred to in the earlier debate, would exclude films not made to be shown in cinemas, such as TV programmes, from the basic tax treatment set out in schedule 4. Amendment No. 35 attempts to refine and clarify the meaning of UK expenditure and has been referred to by other hon. Members.
I shall make a few general conceptual comments about what we are trying to achieve, which will help to meet some of the hon. Lady’s concerns, in particular those about what a “film production company” means and why it has been defined as it has for the purpose of the clause.
As I said earlier, the most important feature of the new relief, and a fundamental way in which it differs from its predecessors, is that it is directed at the film makers, not the financiers, a partnership or a middleman. That is deliberate, because we do not want the tax incentives to be diverted to intermediaries or investors; we want them to go to the film makers themselves. That is the fundamental goal that we are trying to achieve in order to tackle avoidance.
The purpose of the clause is to define those film makers as film production companies and ensure that those people benefit. The definition in subsection (3), to which hon. Members have already referred, follows extensive consultation with the industry. I shall not spend a huge amount of time talking about it, but there has been a reference to the nature of the film-making process. Unfortunately, I do not have a direct family member involved in the film industry, so I cannot claim the degree of knowledge that the hon. Lady possesses. She was eloquent in her use of technical terms, but I shall attempt to come close to matching her with my discussion of the creative process.
By having one “film production company”, the important thing we are trying to do is make it clear that in the making of the film and in the essence of that film, there is a being, a person, a film production company that controls the process, and that that entity, the individual or vehicle, is consistent throughout the different stages of film making, from pre-production to completion.
The first requirement is that a film production company be responsible for the development phase—the initial concept or idea for the film. In advance of the pre-production phase, there is the development phase, as the hon. Lady mentioned. It is the period before the film-making proper starts. With the development phase, in which the initial idea is put together and the film is conceived, one could say that J. R. Tolkein played a very important role in the conception of “The Lords of the Rings” film trilogy. It was an essential part of the development phase, but we would not think of the film having been made at that stage. The making of the film proper begins at the end of the development stage, when one has the story and has conceived of the idea. At that point, the tax support that we envisage for the making of the film kicks in.