Can Film & TV Companies Claim SEIS And EIS?
In recent years, film and television companies have found it increasingly difficult to take advantage of the SEIS and EIS schemes that offer tax incentives to investors.
The reason for this is the new ‘risk to capital’ condition that was introduced by HMRC in 2018.
This condition stipulates that to qualify for EIS/SEIS, a company must demonstrate that:
- It intends to grow and develop its trade in the long term.
- There is a significant risk of a capital loss exceeding the net investment return.
The ‘risk to capital’ condition was designed to stop investments, with little to no risk, benefitting from the generous tax advantages offered by the schemes.
How does this impact film and television companies?
To satisfy the risk to capital condition, companies must be able to demonstrate that their goal is to develop and grow over the long term – something that will be difficult within the film and TV industry due to the nature of the work undertaken.
A company that has been formed solely to produce one film is not going to have long-term growth plans outside of that project.
Operating on a project basis also fails to meet the growth and development condition under HMRC’s ruling. This means that even if your company intends to continue producing films over the long term, rather than it being a one-off, it will still not qualify.
While this does not look positive for film and television companies, there are still circumstances in which such a company could secure advance assurance from HMRC and qualify for investment under SEIS/EIS.
Wondering about the pitfalls to avoid when it comes to SEIS and EIS? If so, check out our article “SEIS & EIS – 10 Common Pitfalls To Avoid”.
Want to know the difference between EIS and SEIS? Click that link to find out more.
How can a film company qualify for EIS/SEIS investment?
Where a company is seeking investment to fund a particular project, for example a film, it will not qualify for investment via SEIS or EIS. This is because it fails to meet the growth and development condition set out by HMRC.
In order to qualify, the company must demonstrate that the investment will not be funding any one specific project but rather things that will assist in the long-term growth of the company and establishment of the brand.
An example of this would be the hiring of a permanent support staff that will grow in line with the company, as this is not linked to any one project and relates to the growth of the company in its own right.
If you believe that your company does qualify for investment under EIS/SEIS, the next step would be to obtain advance assurance from HMRC. This serves as an indication that the company would qualify and offers reassurance to potential investors.
It is important to note, that advance assurance is granted at HMRC’s discretion. This means that even if you believe that investment into your film/television company would qualify and meets the conditions outlined above, HMRC could still query, or reject, the application.
Given the complex nature of qualifying for EIS and SEIS investment as a film or television company, we would recommend speaking with a tax specialist in the first instance.
Curious about the SEIS tax relief? If so, click the link to check out our article.
Key points:
- If you are seeking investment to fund the production of a film or television show, this will not qualify for investment under EIS and SEIS.
- If you are seeking investment to fund the growth of your film or television company in its own right, not linked to any one project, you may qualify for investment under SEIS or EIS (at HMRC’s discretion.)
Grow your startup with the Seed Enterprise Investment Scheme. Through income tax relief, this government initiative allows you to attract investors and business partners. Sleek can help you to gain SEIS assurance and to start benefiting from the scheme. Save time and money with our support.
If you would like to find out more about SEIS and EIS investment for film and television companies, please get in touch.
