Clause 32
Finance (No. 2) Bill
6:45 pm
Edward Balls (Economic Secretary, HM Treasury; Normanton, Labour)
The hon. Gentleman makes a good point. In defining the stages, we must ensure that the opportunities for ambiguities or avoidance are reduced as far as possible. That is exactly why we are specifying clearly that there must be one film production company responsible for all the phases from the beginning of the pre-production phase right through to completion, rather than a number of overlapping entities. There has been extensive consultation with industry figures to ensure that the terms pre-production, principal photography and post-production of a film, as set out in subsection 3(a)(i), are clearly defined and understood in the industry.
In a way the difficulty we face was the point I was going to make in response to the hon. Member for Chipping Barnet: we need flexibility in the way in which the legislation is enacted. We need flexibility in guidance and the way in which the tax authorities treat the production company. We are not saying, as was suggested earlier, that the film company must do all the pre-production, principal photography and the third stage itself. We are not saying that it cannot work in partnership or subcontract part of the work to other companies. The important point is that, through these phases, an entity must be actively engaged rather than simply being a financial shell in order to divert tax revenues.
The way that the FPC will operate will be differentin every case and there has to be flexibility in the way in which we interpret the amount of its engagement in each of the three stages. It will not be a black-and-white situation. The important thing is that we will be able to track the responsibility of the FPC through all the three stages. Companies have to be actively engaged in making a film. The tax relief is for making a film, not for writing a book or for simply saving or avoiding tax.