EIS Film Investment & Production Companies | Films4U

EIS Film Investment & Production Companies | Films4U

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Do EIS & SEIS apply to film companies?

Are you thinking of investing in film but need more information about the schemes available to help you do so? Keep reading to learn more about how Seed Enterprise Schemes (SEIS) and Enterprise Investment Schemes (EIS) work – and, just as importantly, whether and how they apply to the film industry as a whole.

The film industry, just like any other sector, requires investment to grow. Indie production companies, for example, must raise capital to get their projects off the ground, and larger ones need investment to meet the high standards expected of them. To get this much-needed injection of cash, they must attract film investors.

The terms ‘EIS’ and ‘SEIS’ refer to two government-backed schemes that encourage film financiers to support ‘higher risk’ investment opportunities through the provision of certain tax benefits.

Although limitations apply, film companies are eligible if they meet the specific criteria outlined later in this article. The EIS and SEIS schemes are not exclusive to the film industry and cover a range of sectors.

EIS explained

Up to 30% of the money invested in an EIS-qualifying company can be offset against income taxed paid the year before.

SEIS explained

The same rule applies as with the EIS scheme, but you can claim back up to 50% of income tax paid the year before instead. The company you invest in will be higher risk than that of an EIS investment, however.

Potential benefits of each

Enterprise Investment Scheme

  • 30% income tax relief
  • CGT deferral
  • IHT relief after 2 years
  • Tax free gains
  • Loss relief available
  • No remittance charge for non-domiciled residents bringing funds onshore for investment via Business Investment Relief

Seed Investment Schemw

  • 50% income tax relief
  • 50% CGT exemption
  • IHT relief after 2 years
  • Tax free gains
  • Loss relief available
  • No remittance charge for non-domiciled residents bringing funds onshore for investment via Business Investment Relief

Notable exclusions

As suggested, not all film organisations qualify for investment under EIS and SEIS rules. Film, TV, and video companies that make games, programmes, or dramas cannot apply under these schemes. Instead, the focus is on startups and SMEs that are less than seven years old who quality in specific trades and need investment to grow.

Film companies are viewed as permissible trades, which means film financiers can invest in them while benefiting from certain tax advantages. Some industries on the other hand, like energy, and those trading in securities or commodities, are excluded.

Why EIS & SEIS does apply to film companies

As stated by the Financial Times, the British Film Institute (BFI) has raised concerns in relation to how some film companies seem to be missing out on opportunities presented by the streaming boom in recent months. Companies like Netflix, Amazon Prime and YouTube have embarked on spending rampages that have seen them acquire a range of films and series for their online platforms.

Unfortunately, newer and smaller film companies lack the investment needed to compete with their more established competitors. As such, the BFI has created a £20m fund for UK film financiers to access. This scheme will link up to the earlier-mentioned EIS scheme that offers tax breaks to encourage participation from film investors.

The limitations for film production companies & EIS film investment

Limitations apply that will naturally prevent some film companies from securing EIS investment. One such example would be a company looking to produce one movie. Its lack of a long term goal would preclude its ability to create an ongoing stream of taxable income. In essence, the EIS investment scheme exists to foster continuous growth. Film producers must, therefore, convince the HMRC of their plans to create a sustainable income stream.

HMRC versus film investors

Since tax breaks were introduced by the Labour government in 1997, the relationship between HMRC and film investors has been characterised by confusion and frustration. Financiers are often told to supply more information to secure approval but they can rebuke this request, as they feel HMRC should have an existing knowledge of the sector already.

The creation of the earlier-mentioned BFI scheme could be seen as an attempt to diffuse this confusion and introduce some much-needed clarity. This initiative is already showing signs of success and has enjoyed welcome support from within the UK film industry as a whole.

Capital condition: The risks

Has the investment in question been structured to present minimal risk to its financiers? To answer this question, two conditions must be satisfied. The company must clearly demonstrate its plans for long-term growth. It must also reveal what risks exist and, in such cases, signal this to its prospective group of investors. 

If you want to find out more, read HMRC’s guidance on the topic here.

Companies must be UK-based

To be eligible for the EIS and SEIS schemes, companies don’t have to film in the UK. It is acceptable for the movie to be filmed across multiple locations. However, the producer must be able to prove their company is permanently based in the United Kingdom.

How EIS/SEIS film investment works for film investment

When investing in a film company, a specific process is followed. It’s important to understand how this works before committing to a project.

The process is as follows:

  1. Once rights have been secured by the filmmaker, a production company is created. SEIS or EIS funding is not available for founders who own more than a 30% stake in the business.
  2. Next, investors provide funding so that the company can commence production. It is at this point that EIS/SEIS relief is applied (subject to qualification).
  3. At the production stage, a clear agreement is created that defines how exchange and completion will work. Before the film company can issue shares, it must ensure it has received the investment it needs.
  4. Next, the film is released into theatres and the company starts to accrue royalties, a percentage of which be divided as shares between the investors.
  5. Investors will only be able to access EIS/SEIS tax relief once a three year period has elapsed. 

Note that, if a film company liquidates, its investors won’t lose the income tax relief they were entitled to upon subscription. It is also possible to claim for viable losses once shares have been held for longer than a three year period.

Our expertise

Have a look at some of the projects we’ve worked on to learn more about the international success we’ve enjoyed.

When you’re ready, contact us directly to discuss your plans. Either that or use our simple online form to apply and we’ll get back to you as a matter of urgency.


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