Feature films qualify for tax benefits under EIS. If you invest money in a film production company you can claim 30% of your investment back as income tax relief under EIS. Plus you will be named in the credits and get a chance to meet Angelina.
The UK film market is the third largest in the world. In 2015 the market was worth £4.1 billion, up from £3.8 billion in 2014.
Since 2006 we have seen a steady growth in film revenues year on year (with the exception of 2014). This is partly due to SEIS and EIS tax reliefs.
In 2015, the latest available data, there were 6,805 film production companies, 2,660 film, video and TV post-production companies, 420 film distribution companies and 230 film exhibition companies. If you choose a good script to invest into the potential for tax efficient investment is enormous.
Film production and most film post-production activities qualify for EIS tax relief purposes.
In most cases, investing in a film company is simple:
EIS is beneficial for the film investor. EIS includes:
The Company will usually use its best endeavors to preserve the EIS qualifying status. However, in order to benefit from EIS an investor will need to meet the following criteria to qualify:
You may claim relief against income tax for 30% of funds used to subscribe for new ordinary shares. There is an annual investment limit of £100,000. Depending on how much you invest and what is your income tax liability for the current and previous tax year, you will be able to claim 30% income tax relief of the sum invested.
The dividends received by an investor in relation to his EIS shares are taxed in the same way as any other dividends. That means that you will not pay tax on the first £5,000 of dividends you receive in the tax year. Above this allowance you will pay dividend tax depending on which tax bracket you are in at the following rates:
If the Company is liquidated you will not lose your income tax relief which you received on subscription. You will be able to claim loss relief if you suffer a loss and held the shares for at least three years.
Many recent blockbusters have been funded through SEIS and EIS, including Brooklyn, Carol, Mr Turner and Testament of Youth. At Gannons we have advised on a range of film projects including BBC dramas, a vampire horror feature film and a range of independent productions.
Some film production funds deliver annual investment returns over 10%. This is much higher than the current return rate on a savings account.
John Deane is a partner in the commercial team at Gannons. The majority of John’s clients are in the creative sectors, notably TV, theatre, film, and music.