EIS Film Tax

HMRC COMPLIANCE

Contrary to what you may have heard at chit-chat networking events or on social media platforms, UK-based independent film companies still qualify for SEIS and EIS advanced assurance, even if HM Revenue & Customs exclude other trades. HMRC have in recent times decided to decline and discourage speculative ventures to reduce their workload, by only considering substantive submissions.

At projection pictures we work as paid consultants to advise independent film company start-ups on how to approach HMRC to get SEIS/EIS advance assurance, we do this work in conjunction with accountant Philip Gambrill FCCA co-founder of pglemon.co.uk. If you intend to apply for both SEIS & EIS, at least 70% of the capital raised under SEIS must be spent before any money be raised under the EIS scheme.

HMRC will expect to receive an Executive Memorandum or Investment Memorandum document you intend to present to investors. The pages will outline what the project is, if any principal cast are attached or will be, are any crew (especially Heads of Department) on-board, when filming will commence and for how long, from pre-production expenditure until post is complete, and how attractive is the Return On Investment estimate likely to be once the project is distributed. The company should demonstrate a future slate of other material to be produced, not just as a Special-Purpose-Vehicle (a limited company) for a one-off film production.

Most critical of all, the submission must include a short list of named investors, otherwise HMRC will consider it incomplete and decline it. If HMRC have accepted the submission, the incorporated SPV should press on with the production, while HMRC carry out the compliance assessment, which could last from 8 weeks to a few months, regardless of the time of the year. There is no guarantee HMRC will grant advanced assurance right away, as HMRC may pose more questions to be answered before a final decision is made.

We strongly recommend you secure some investment from an investor or crowd funding campaign, before you apply for HMRC compliance, as this will prove to them that your SPV is a viable concern. However if you have not yet incorporated a limited company but you intend to, before you proceed any further please contact page first, as HMRC assess everything from company house fillings onwards and will look for any reason to decline your application, as there are many pitfalls.

Once the company is advanced assured, the company is more likely to attract High Net Worth or Sophisticated investors, as they can receive generous tax breaks on shares, which must remain with the company for a minimum of 3 years for shares to qualify.

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, 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 link for further guidance.

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