Alt Investments

GUEST OPINION: Investing In Film - Time For Another Take?

Kirsty Bell Nyman Libson Paul Partner London 17 December 2013


Kirsty Bell, partner of Nyman Libson Paul, explains how measures like better finance structures will encourage more investors to get involved in film.

accountancy Nyman Libson Paul has specialised in managing the financial affairs
of the entertainment industry for 80 years, and is now using that expertise to
launch a series of film EIS vehicles under the banner of “Goldfinch Pictures
Ltd”. Here, NLP partner – and successful filmmaker – Kirsty Bell explains how
measures like better finance structures will encourage more investors to get
involved in film.

Film investment badly needs an image overhaul – and not just so that the
vibrant film industry can continue to thrive. Most clients and advisors will
know that film investment is strongly supported by government tax incentives.
What they may not know is how far filmmakers are rolling out the red carpet to
attract investors. Innovative finance structures are turning the old ways on
their head, meaning that clients can invest in film with more confidence than
ever before.

As someone who is passionate about UK film as well as being a tax
specialist, it pains me to see how misunderstood film investment is. Some
associate it with tax evasion while others see film projects as mere vanity
investments akin to black holes swallowing up endless capital with precious
little hope of returns.

There’s no denying that film investment has had some pretty poor press
over the years. Tax breaks rolled out in the 1990s were abused by some parties
and just last year certain celebrities hit the headlines over dubious film
investment schemes. But while tax planning and film investment continue to be
mentioned in the same breath, today it is for all the right reasons. To put it
bluntly, pre-2007 some film finance schemes were about “playing the rules” on
tax. In contrast, the EIS, Seed EIS and tax credit incentives taken advantage
of today are entirely legitimate. In fact, HMRC smiles on tax-incentivised film
investment to such an extent it is probably the most supported industry in the UK today.

The tax incentives prompting high net worth investors to invest in EIS
vehicles are certainly very generous. They also go a long way towards mitigating
investors’ fears of losing money. The income tax relief for EISs has been
raised from 20 per cent to 30 per cent, meaning that the government is
essentially funding almost a third of any EIS investment. Furthermore, higher-rate
taxpayers can obtain loss relief of up to 65 pence in the pound, which
effectively gives them a government-backed safety net should investments not

These tax breaks offer a good deal of reassurance, but savvy EIS firms
(and film production companies) are going much further to allay investors’
concerns. They are building investor protection into the finance structure from
the off and making sure that equity investors are first in line to get paid –
not, as has often been the case, at the bottom of the pile.

Equity investors often step in towards the end of a project to save the
day, providing the capital to ensure a film in post-production has a score or
creating a distribution budget which will ensure a finished film is actually
seen by audiences. It is therefore pretty ironic just how poorly investors are
sometimes treated in return – even in the case of angel investors who fund a
big chunk of a project. Their money is swallowed up and they have little notion
of when, or even if, they will see a return. A project may be wildly successful
and yet investors may not see any upside for a long time. This is the
antithesis of our approach, and of the production companies we work with.

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