John Hemming (Birmingham, Yardley, Liberal Democrat)

I have a tendency to blink when I am in the Whips Office and find myself on a new Committee. Reading these papers, I must declare a sort of interest, inasmuch as I am in the intellectual property business, but not the film business itself. In the intellectual property business, one spends the money at the start and receives the income  generally at the end. In my reading of schedule 4, to which the clause relates, we appear to bring forward the tax date for income. That confuses me. It may be that I have got it all wrong, but as far as I can see on that reading, I should not want to be deemed a film production company, because I would pay tax earlier. I thought that the idea was not to.

Edward Balls (Economic Secretary, HM Treasury; Normanton, Labour)

The clause introduces the schedule that we will debate shortly, which sets out the details of the application of the tax treatment of film production companies. The hon. Member for Birmingham, Yardley (John Hemming) both gets to the heart of the point and misses it. He is absolutely right that we are changing the future taxation treatment of films, and we are doing so precisely, as he says, so that the tax treatment of a film production company applies over the course of the making of a film rather than on completion. As we discussed at length on Tuesday, we are doing that because that is in line with the way in which films and TV productions are made—film companies get the income early to pay for the making of the film. We are bringing the tax treatment into line with how films are made and accounted for, so that we can then offer enhanced tax relief over the lifetime of the film. The reason why film production companies will want this is partly because it is in line with how they work in any case, and partly because they will then get a fairly substantial enhanced tax support for doing so. I hope that I have reassured the hon. Gentleman, and that he understands our point.