Can EIS funding still be used successfully for film?
- On March 28, 2019
- By Lucy White
Changes in the UK’s approach to financing have caused many to question whether the EIS funding mechanism still has any relevance to the film industry. Screen talks to experts in the field.
Can Enterprise Investment Schemes (EIS) and Seed Enterprise Investment Schemes (SEIS) still be used successfully for film? This is a question dividing opinions in the UK industry.
HM Revenue & Customs (HMRC) wants assurances that companies applying for EIS funding — in recent years a major source of independent film financing in the UK — have long-term growth plans and that investors face a genuine risk of losing their capital. Rules governing the EIS passed into law in March last year to include a “risk to capital” test.
As film, TV and video outfits have discovered, single projects (whether individual movies, TV dramas or games) and slates of projects are no longer eligible. EIS and SEIS are instead aimed at supporting companies early in their existence (within seven years of their first commercial sale). These companies must be engaged in qualifying trades and they must use the money to grow and develop their business.
Film still qualifies. In theory, the new regulations should enable ambitious UK production outfits to scale up.
“EIS has been through a transformation with the introduction of HMRC’s risk to capital rules,” says Stephen Bristow, partner at Saffery Champness, who has been involved in the policy development of independent UK film and television for the past 15 years. “Those businesses looking for patient capital to grow their business should fall within the new rules. We have recently had confirmation from HMRC via the advanced assurance system that this is the case.”
“EIS in the film and TV sector is pretty much in turmoil and it is all driven by the new risk to capital conditions,” says Sue Crawford, partner and head of the tax group at Wiggin.
The hope is that these problems will soon be ironed out. The challenge is to explain to HMRC how production and distribution businesses really work as companies.
However, as Bell, Reeve and others point out, the new, refocused version of EIS could be “great” for the film and TV business. It has the potential — as Reeve suggests — to provide “a significant source of independent investment into production and distribution businesses so they can afford to hire people, pay people and have decent money to develop. That is more difficult money to come by than production funding.”
If EIS money does begin to flow into entrepreneurial new film businesses, one prediction can safely be made — all the recriminations over the past 18 months about HMRC’s intransigence and delaying tactics will quickly be forgotten.
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