The government yesterday stepped up its campaign against film-makers who abuse tax loopholes by ordering European producers to put more money into co-productions in the UK.

Film-makers from France, Italy, Denmark and Iceland will now have to spend 40% of their budgets in the UK to qualify for tax relief from the Treasury, up from 30% previously.

The move was described as a stop-gap measure before the government unveils a complete overhaul of co-production arrangements with other countries. Film minister Estelle Morris said too many co-productions were taking advantage of the tax regime by shooting films which have never been shown in the UK.

"We have to make sure the co-production system delivers real cultural and economic benefits to both partners," she said.

Similar changes were made to guidelines for Canadian film-makers last year, as the government and UK film industry seeks to address an imbalance in the financing of co-productions. Some 175 co-productions are expected to be made this year, including 19 from France, up from an average of 20 in the early 1990s.

Ronnie Planalp, director of film at Pact, the trade body for independent film and television producers, said the move would only affect poor quality films which take advantage of old co-production guidelines and are rarely released in the UK.

"It is going to get tougher and that will weed out some of the films which get made and are never heard of again," she said. "By changing this limit they have brought some balance back. UK plc has been getting the short stick in these deals."

The government has unveiled a series of changes to the tax regime for film-makers this year.

Filming on Tulip Fever, a production starring Jude Law and Keira Knightley, was cancelled in February after the Treasury scrapped a loophole allowing investors in British films to claim 25% tax relief in their first year.