Clause 57
Finance Bill
7:15 pm
Edward Balls (Economic Secretary, HM Treasury; Normanton, Labour)
Clause 57 allows companies to opt out of the special rules for film production companies, for which we legislated in the Finance Act 2006. The clause is designed to respond to representations from the TV industry in particular and has been welcomed by it. The laws introduced last year were discussed with a number of TV production companies and tax professionals. We believed then, and still believe, that they make sense for many companies. Therefore, we want to leave them in place. As the hon. Lady said, the point was made in Committee last year that concerns had been raised. Rather than rushing to make sudden changes then without consultation at a later stage in last year’s Finance Bill, we had further discussion with those who saw problems and proposed a simple proportionate solution, which is the clause before us today.
As for the European matter that she raises, the EC treaty prohibits subsidies that distort competition and trade. Aid is allowed on cultural grounds for films. The Commission has set out criteria for that. The UK’s cultural test was notified in December 2005. The Commission considered the test last September and raised concerns that it was too focused on economic rather than cultural factors. The Treasury, with the Revenue and the Department for Culture, Media and Sport, then worked to produce a revised test that met those concerns, while still supporting the development of a sustainable film industry. We made those changes to ensure that, consistent with our European obligations, we would transit to the new regime, which is operational.
In recent years, we have had to make changes to the film regime to ensure that tax avoidance was addressed. Last year’s regime, which we debated at length, is a simplified, sensible and effective regime. The fact that we have such a small change before us today is a tribute to the success of that new regime, and I commend the clause to the Committee.