I have to agree - as long as you don`t use other people`s money there is no problem. As we work in the film industry we keep film specific clients` accounts in which funding is received and then the production costs are paid from. When revenues come in they go back in that film specific account. Each film has its own company, VAT and client account so that each film is completely ring fenced. On the brighter side, when we last had a compliance visit they awarded us as a Quality Assured firm for the way we handle so many accounts.
It seems like this is happening all the time but in reality it is a few cases given huge publicity.
The systems are quite robust in that a film has to be certified as British with the BFI (on an interim and final basis). They get to see the budget and final cost reports and the actual film. The UK film tax credit claim is presented to HMRC specialist unit which scrutinise every aspect. They will check out what has been done before and who is making the claim this will include looking at films` websites and those of the producer and IMDB profiles.
Bearing in mind the BFI and HMRC film unit are experienced in knowing `what looks right` in a movie and what to expect in a film`s production cost reports relative to its budget.
It is because HMRC are doing their job that attempts at overinflated claims are getting flagged up.
There will always be someone ready to try and abuse any tax relief system. We are very much involved in claiming UK film tax relief on British films. It is worth roughly 20% of the core production costs (pre, production and post production). This is hugely important to use as either part of the film`s finance costs or to be used as part of the recoupment for investors. On a lower budget film of say up to £150,000, coupling an SEIS (50% tax credit) and the UK film tax credit (20%) for investors the film would only need to make 30% to break even. It is a huge consideration for increasing film investment and increasing the number of films made.
There is a robust quality assurance check on UK films. Firstly they have to be certified as such by the BFI which in certain cases requires an audit certificate from an independent auditor. They get a copy of the completed film to see that something was made and is it in line with the budget. Then the costs have to be presented to HMRC film unit which can scrutinise every aspect of the claim.
There are rogue `producers` (widely publicised) who have tried to make fraudulent claims who are now enjoying life behind bars. We have worked on 30 films all of which have benefited from the UK film tax credit and it is bringing international films to the UK to be made as British.
When people play the game properly it is an excellent system as when films make money and distributions are made to cast and crew as part of their remuneration contract the tax credit can be claimed again on those disbursements.
The only ones we are involved with are those that are approved by statute and in turn HMRC such as SEIS and EIS or a hybrid of the two. These schemes we use for British film investment. If the right project is selected with the right people with the real purpose of producing a film with a route to market it can be a definite alternative form of investment. The SEIS scheme used on a fully financed film can guarantee almost 70% of the capital coupled with the UK film tax credit. It is a model that can produce very high returns for investors. As long as the film production company remains compliant for 3 years it avoids the risk of any challenge and all gains are completely free of CGT
Now we have another story - Hollywood accounting. Where the biggest movies (on paper) make no money. No net means no distributions to participants. I have seen the Harry Potter`s profit statement where the film took in $1billion in a weekend and still made a loss. Hollywood A listers negotiate gross percentages as they know there is no net. Note here is never invest in big budget movies with big studios attached. Invest in people who have made money for people and can show you the numbers. We are attached to lower budget UK films where we control the accounting and investors have made over 300% and more importantly actually see it. That way they reinvest and so the wheel keeps turning.
Red has a good point - the potential PI claims to come must be horrendous for the advisers of partnerships. But the negative impact of the partnerships has hurt many advisers and made some investors very wary.
Fortunately these are long gone now and the excitement of film investment has returned.
Caveat Emptor reigns here. Carry out due dilligence any wild claims will be just that. Any film production company must be able to show that they can do what they say and have done it before. But only invest for the right reasons - to make a film and make it successful
Seeing that the model of making British films works first hand on over 16 films we created our own production company which has financed 3 features in 18 months (the first to be released sits next to FLIGHT with Denzil Washington in the charts) all of which have received worldwide distribution and have become self funding to the extent that we will finance at least 4 films a year with 2 more green lit for October.
Meet the stars, visit the set, attend the premiere and be in a movie as an extra.....Who said accountancy was boring?
All of these `schemes` which are nothing more than tax avoidance plans with no commercial purpose have, quite rightly, been smashed. The British film industry is enjoying an exciting time because those that intend to actually make a film, have a passion, and want it ro be successful. They will do so correctly, seek experienced advice and have the schemes (SEIS, EIS or a combination) pre approved by HMRC. The deluded few that try and circumvent the system to fraudulently claim VAT and or the UK film tax credit will get discovered at some point. Projects are examined by HMRC before being approved and once underway are presented to BFI usually twice (interim and final) which examines the project as a whole and then HMRC will examine the accounting and computation of the claim again on two levels. Most film schemes are now presented by specialist firms with many projects behind them and are known to BFI and HMRC as dare I say it legitimate `players`.
With a strong project, a pedigree cast, crew and distribution in place British film investment is now a real alternative to other investments. For lower budget UK films, the SEIS gives a 50% tax break on investment amongst a raft of other benefits depending on an investors tax position. Once 70% of that has been spent the film can move into an EIS to raise larger sums for bigger projects.
Partnerships were bound to fail where there was no commercial purpose other than tax avoidance. That many have been unravelled is unsurprising but many of the scheme creators have risked legitimate UK film investment where potential investors have seen such often highly publiised cases.
We have been involved in film financing and structuring for film productions for a number of years and the only legitimate way for investors to get legitimate tax breaks is by using HMRC pre approved schemes such as an EIS or the new SEIS.
These schemes allow 30% (EIS) and 50% (SEIS) tax credit for equity investors, tax free profits (after 3 years) CGT deferral and full loss relief if the film fails. Because investors are still worse off if the film does not work there is a real incentive in making commercial projects which stimulates the economy and rewards the risk takers in a fair not inflated way.
But the objective is a commercial one i.e. to make successful British films and for the investors to make money. It is not uncommon for investors on carefully selected projects (that is the key) to make 100-200% tax free.
As EIS based schemes are approved by HMRC and have to be continually compliant they are not subject to the risk of being torn apart years down the line.
My answers
I have to agree - as long as you don`t use other people`s money there is no problem. As we work in the film industry we keep film specific clients` accounts in which funding is received and then the production costs are paid from. When revenues come in they go back in that film specific account. Each film has its own company, VAT and client account so that each film is completely ring fenced. On the brighter side, when we last had a compliance visit they awarded us as a Quality Assured firm for the way we handle so many accounts.
Clients` accounts are vital for us and the rules are quite simple - do not ever use them for anything else!
FILM PRODUCTIONS
It seems like this is happening all the time but in reality it is a few cases given huge publicity.
The systems are quite robust in that a film has to be certified as British with the BFI (on an interim and final basis). They get to see the budget and final cost reports and the actual film. The UK film tax credit claim is presented to HMRC specialist unit which scrutinise every aspect. They will check out what has been done before and who is making the claim this will include looking at films` websites and those of the producer and IMDB profiles.
Bearing in mind the BFI and HMRC film unit are experienced in knowing `what looks right` in a movie and what to expect in a film`s production cost reports relative to its budget.
It is because HMRC are doing their job that attempts at overinflated claims are getting flagged up.
www.graham-assoc.co.uk
FILM TAX RELIEF
There will always be someone ready to try and abuse any tax relief system. We are very much involved in claiming UK film tax relief on British films. It is worth roughly 20% of the core production costs (pre, production and post production). This is hugely important to use as either part of the film`s finance costs or to be used as part of the recoupment for investors. On a lower budget film of say up to £150,000, coupling an SEIS (50% tax credit) and the UK film tax credit (20%) for investors the film would only need to make 30% to break even. It is a huge consideration for increasing film investment and increasing the number of films made.
There is a robust quality assurance check on UK films. Firstly they have to be certified as such by the BFI which in certain cases requires an audit certificate from an independent auditor. They get a copy of the completed film to see that something was made and is it in line with the budget. Then the costs have to be presented to HMRC film unit which can scrutinise every aspect of the claim.
There are rogue `producers` (widely publicised) who have tried to make fraudulent claims who are now enjoying life behind bars. We have worked on 30 films all of which have benefited from the UK film tax credit and it is bringing international films to the UK to be made as British.
When people play the game properly it is an excellent system as when films make money and distributions are made to cast and crew as part of their remuneration contract the tax credit can be claimed again on those disbursements.
Rob Graham
www.graham-assoc.co.uk
TAX EFFICIENT INVESTMENT SCHEMES
The only ones we are involved with are those that are approved by statute and in turn HMRC such as SEIS and EIS or a hybrid of the two. These schemes we use for British film investment. If the right project is selected with the right people with the real purpose of producing a film with a route to market it can be a definite alternative form of investment. The SEIS scheme used on a fully financed film can guarantee almost 70% of the capital coupled with the UK film tax credit. It is a model that can produce very high returns for investors. As long as the film production company remains compliant for 3 years it avoids the risk of any challenge and all gains are completely free of CGT
www.graham-assoc.co.uk
Now we have another story - Hollywood accounting. Where the biggest movies (on paper) make no money. No net means no distributions to participants. I have seen the Harry Potter`s profit statement where the film took in $1billion in a weekend and still made a loss. Hollywood A listers negotiate gross percentages as they know there is no net. Note here is never invest in big budget movies with big studios attached. Invest in people who have made money for people and can show you the numbers. We are attached to lower budget UK films where we control the accounting and investors have made over 300% and more importantly actually see it. That way they reinvest and so the wheel keeps turning.
Best regards
Rob Graham
Graham Associates (International) Ltd www.graham-asoc.co.uk
FILM INVESTMENT
Red has a good point - the potential PI claims to come must be horrendous for the advisers of partnerships. But the negative impact of the partnerships has hurt many advisers and made some investors very wary.
Fortunately these are long gone now and the excitement of film investment has returned.
Caveat Emptor reigns here. Carry out due dilligence any wild claims will be just that. Any film production company must be able to show that they can do what they say and have done it before. But only invest for the right reasons - to make a film and make it successful
Seeing that the model of making British films works first hand on over 16 films we created our own production company which has financed 3 features in 18 months (the first to be released sits next to FLIGHT with Denzil Washington in the charts) all of which have received worldwide distribution and have become self funding to the extent that we will finance at least 4 films a year with 2 more green lit for October.
Meet the stars, visit the set, attend the premiere and be in a movie as an extra.....Who said accountancy was boring?
Best regards
Rob Graham
Graham Associates (International) Ltd www.graham-assoc.co.uk
FILM INVESTMENT
All of these `schemes` which are nothing more than tax avoidance plans with no commercial purpose have, quite rightly, been smashed. The British film industry is enjoying an exciting time because those that intend to actually make a film, have a passion, and want it ro be successful. They will do so correctly, seek experienced advice and have the schemes (SEIS, EIS or a combination) pre approved by HMRC. The deluded few that try and circumvent the system to fraudulently claim VAT and or the UK film tax credit will get discovered at some point. Projects are examined by HMRC before being approved and once underway are presented to BFI usually twice (interim and final) which examines the project as a whole and then HMRC will examine the accounting and computation of the claim again on two levels. Most film schemes are now presented by specialist firms with many projects behind them and are known to BFI and HMRC as dare I say it legitimate `players`.
With a strong project, a pedigree cast, crew and distribution in place British film investment is now a real alternative to other investments. For lower budget UK films, the SEIS gives a 50% tax break on investment amongst a raft of other benefits depending on an investors tax position. Once 70% of that has been spent the film can move into an EIS to raise larger sums for bigger projects.
Rob Graham, Graham Associates (International) Ltd www.graham-assoc.co.uk
FILM INVESTMENT
Partnerships were bound to fail where there was no commercial purpose other than tax avoidance. That many have been unravelled is unsurprising but many of the scheme creators have risked legitimate UK film investment where potential investors have seen such often highly publiised cases.
We have been involved in film financing and structuring for film productions for a number of years and the only legitimate way for investors to get legitimate tax breaks is by using HMRC pre approved schemes such as an EIS or the new SEIS.
These schemes allow 30% (EIS) and 50% (SEIS) tax credit for equity investors, tax free profits (after 3 years) CGT deferral and full loss relief if the film fails. Because investors are still worse off if the film does not work there is a real incentive in making commercial projects which stimulates the economy and rewards the risk takers in a fair not inflated way.
But the objective is a commercial one i.e. to make successful British films and for the investors to make money. It is not uncommon for investors on carefully selected projects (that is the key) to make 100-200% tax free.
As EIS based schemes are approved by HMRC and have to be continually compliant they are not subject to the risk of being torn apart years down the line.
Rob Graham
Graham Associates (International) Ltd www.graham-assoc.co.uk
Independent Moving Pictures Ltd