You may have heard at chit-chat networking events, or read on social media platforms, that UK based film start-up companies no longer qualify for SEIS and EIS; they do still qualify. Therefore you need to find the best advisers in SEIS/EIS film tax guidance. As HM Revenue & Customs only consider substantive submissions and will decline speculative ventures.
EIS FILM TAX
At projection pictures we work as paid consultants in SEIS/EIS film tax guidance for film companies, as we know what HMRC expects for EIS advance assurance. We work jointly with accountant Philip Gambrill FCCA, co-founder of pglemon.co.uk.
HMRC will expect to receive an Investment Memorandum, that an investor will see. The pages will state what the project is about and an overview of the sector. If individual cast or crew (especially Heads of Department) are attached or will be. The commence date for pre-production through production [principal photography], until the post is complete; and what the entire budget expenditure will be.
A territorial sales estimate, by a sales agent or distributor is needed, to reflect the return on investment (important to investors) once the project is delivered. The company, (a Special-Purpose-Vehicle) will grow and develop a slate of projects to be produced. Not just for a single, one off film production.
A list of a few investors by name is critical; otherwise HMRC will consider it incomplete and reject it. If HMRC accepts the submission from the company, it should go into production in the meantime, as HMRC assessment can take weeks, to do. As there is no guarantee HMRC will give advanced assurance right away; as HMRC may have more questions to be answered before a final decision is made.
GET SOME EQUITY
Source some equity from an investor or from crowd-funding, before you apply for HMRC compliance, to prove the SPV is viable. If you have not yet incorporated a limited company, but plan to, contact us first, to avoid any pitfalls from the start. Be aware if you apply for both EIS and SEIS; of the capital raised under SEIS, at least 70% must be spent, before any money is raised under the EIS scheme. Once the company is advanced assured by HMRC, the company is more attractive to High Net Worth or Sophisticated investors. As they could receive tax breaks on shares, which must remain with the company for a minimum of 3 years for shares to qualify.
UK FILM TAX REBATE
For all British qualifying films of any budget level; the film company can claim a payable cash rebate of up to 25% on UK qualifying expenditure. The Tax Relief is capped at 80% of the core expenditure i.e. even if you have 100% UK qualifying expenditure, the tax relief is only payable on up to 80%. There is no limit on the budget of the film, or the amount of relief payable within the 80% cap. The film must be intended for theatrical release. Go to the British Film Commission website page for more guidance.
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