Looking For An Investor For Your New Film Project?
Advice on UK Tax Benefits and Investment Schemes for Filmmakers.
If you’re embarking on the journey of financing your first film, whether it be a short film or your first feature film, then you may find yourself struggling to get an investor interested in your project. We had a chat with Tax Innovations in Winchester, who laid out some options for film financing that will appeal to potential investors. Here’s what they had to say about UK investment schemes and the tax benefits available to investors, as well as outlining some of the regulations involved in these schemes for you and your film investor.
Seed Enterprise Investment Scheme (SEIS)
If you have a short film that you want to make, but haven’t secured funds, then a Seed Enterprise Investment Scheme (SEIS) might be for you. SEIS is a scheme that provides potential investors some significant tax benefits. The scheme was introduced by HMRC in order to attract more seed investment in small UK companies. By structuring your short film production through a new qualifying limited company, you can make investment in your project very attractive to potential investors.
Qualifying investments receive up front tax relief at 50%. This means that by investing, say £1000, an investor reduces their tax liability for that tax year by £500, immediately halving their financial risk of investment. Should your project fail, further loss relief of up to 45% is also available for the other 50% of the investment, which means that the cash that the investor actually has at risk could be as little as 27.5% of the total amount invested.
Additionally, capital gains on the shares are exempt from capital gains tax (CGT), so when your film goes global, the initial investors won’t pay any CGT when the shares are sold for profit. These tax reliefs make SEIS investment a very attractive proposition for investors.
Limits on Tax Relief
Investors can get tax income relief on up to £100,000 of SEIS investment per year, and therefore can reduce their tax liability by up to £50,000 per year. The trade that into which the investment is made must be less than 2 years old, and a maximum of £150,000 of SEIS investment per company will qualify for tax relief.
Need More Investment?
Perhaps you’re looking to get your first feature film funded, and need more investment than outlined in the above schemes? In some cases, it may be that you need to re-assess your budget and see where you can make savings on your production, but if you find that your film requires more investment than SEIS can provide, then further investment may qualify for relief under the Enterprise Investment Scheme (EIS), a similar scheme that allows investors to obtain 30% income tax relief on up to £1million of investment per year, as well as a full CGT relief. Your company can receive up to £5million of SEIS and EIS investment in any 12 month period.
It’s Hard Graft, But It’s Worth It… How to Qualify for Relief
The company and the investors both need to meet extensive criteria from the day the company is created, right through to 3 years after the shares are issued, otherwise the tax relief is withdrawn from investors. It is therefore important to prepare for SEIS/EIS as early as possible in the process.
You should seek professional advice, ideally before the company is formed, to ensure all the necessary criteria are met throughout the investment period. Companies such as Tax Innovations can guide you through every step and help you to ensure the investment in your film is maximised.
For more information, visit the Tax Innovations website which has more details on qualifying for SEIS and EIS relief.
As with all things financial, professional advice should always sought before looking to raise funds or talking to investors.
Winchester Short Film Festival is run by Winchester Film & Art CIC.
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