Brit pix in tax fix

by Adam Dawtrey

The first movies hit by the British government's tax clampdown started to feel the pain last week.

As the days passed with no sign of a compromise deal from the Treasury to protect those half-dozen pics already in pre-production, their producers drew ever closer to the point of no return.

Crew members on John Madden's "Tulip Fever" were handed their notice and spent the week packing up and shipping out of Pinewood Studios, in preparation for the full shutdown of pre-production Feb. 20.

Out in Nova Scotia, the team preparing Nick Willing's "River King" were on hiatus in a snowstorm while waiting to hear their fate. Down in South Africa, the producers of Regis Wargnier's "Man to Man" started shooting Feb. 18 in the knowledge that they might not have enough money to finish.

Back in London, "The Libertine" pushed its start date back a week to Feb. 30 as the producers scrambled to refinance the $22 million Johnny Depp pic while still hoping for a positive signal from the government. Gaby Dellal's $7 million "On a Clear Day," starring Peter Mullan and due to shoot April 5, scaled back its pre-production to a bare minimum.

In Bristol, the crew is working unpaid on director John Hay's $9 million romantic comedy "The Truth About Love," starring Jennifer Love Hewitt and Dougray Scott, due to shoot March 22. Producer Tracey Adam is taking out a personal loan to keep pre-production going, but admits the project will collapse unless the government grants transitional relief.

Those six projects were the worst hit by the government's sudden change in tax rules, announced Feb. 10. The move effectively outlawed two of the U.K.'s most active equity funds, Ingenious Media's Inside Track and Grosvenor Park's First Choice.

Industry lobbyists begged for transitional arrangements that would allowing both funds to honor their existing commitments. With six projects on the brink of disaster, an answer was needed within days, but none had come by Feb. 19.

Some of the imperiled projects will go ahead regardless, if necessary slashing and burning their budgets, conducting a fire sale of rights to plug the gap or lashing together new equity on whatever terms they can find.

For the producers of "The Libertine," for example, there's little option but to shoot now, even without the $7 million from First Choice. It was a remarkable feat for them to hold onto Depp after he became a megastar with "Pirates of the Caribbean: The Curse of the Black Pearl," but if they postpone, the chances of getting him back at some later date are infinitesimal.

On the other hand, the $45 million "Tulip Fever," which was developed by DreamWorks and due to be co-financed by Miramax, looks set to halt unless the government allows the $15 million investment from Inside Track. Unconfirmed reports suggest DreamWorks already has dropped out, with Miramax (which currently has no contractual obligations to the project) poised to take over if the Inside Track coin is upheld. But time is running out fast.

What's at stake is not just the fate of a few films, but of the companies behind them. "Tulip Fever" producer Alison Owen has stated publicly that her company, Ruby Films, "will probably fold" if her movie goes down with a $6 million strike cost around its neck.

Another dozen or more projects in development were counting on First Choice or Inside Track coin as the cornerstone of their financing. These include Fernando Meirelles' "The Constant Gardener," Pratihba Parmar's "Nina's Heavenly Delights," Julien Temple's "The Golden Man" and Francois Girard's "The Assumption of the Virgin."

These can afford a longer wait to discover if the government will eventually agree to transitional arrangements may have more chance to find alternative finance.

Surviving funds that use the Section 48 film tax break (left largely untouched by the Feb. 10 clampdown), such as Scion and Matrix, are reporting a rush of interest from investors and producers, switching over from Inside Track and First Choice.