Film Investment with EIS
Film Investment with EIS
EIS is a UK government scheme approved and managed by HMRC.
The information contained within this web page is designed to provide information only and does not constitute any investment , tax or legal advice or offer to invest in any fund contained therein
Film Investment with EIS – What is EIS
The UK government set up the Enterprise Investment Scheme in 1994. It offers a number of tax breaks to investors who buy shares in small, private unlisted companies:
You can invest a maximum of £1 million each year through EIS and get income tax relief of 30%. So if you invest £100,00 in a company that is eligible for EIS, you can reduce your income tax bill by £3,000 in the year that you invest. There are no capital gains tax on any profits you make from an EIS investment. So if you invest £10,000 and five years later sell your shares for £20,000, you’ll get the full benefit of the £10,000 profit.
If you make a loss on your investment, you can offset that loss against income tax.
Say you lose your entire £10,000 investment. Because of income tax relief, your actual loss is only £7,000 (£10,000-£3,000). So you can, if you choose, reduce your taxable income for the year in which you disposed of the shares by £7,000, resulting in a saving of £2,800 (40 per cent of £7,000) for a higher-rate taxpayer.
This makes you actually loss £4,200 against a potential unlimited upside.
Investors who invest for a minimum period of three years also benefit exemption from capital gains tax (CGT) and inheritance tax (IHT) which means growth within the EIS is tax-free.
An overview of the Enterprise Investment Scheme (EIS)
- Investors can receive initial income tax relief of 30% on investments up to £1Mn per tax year.
- “connected” parties to a company (employee, director, partner) are not eligible for EIS relief from investments in that company.
- An individual’s stake in the company can be no more than 30%.
- EIS tax relief applies only to all incorporated companies
- Capital Gains exemption on profits earned on shares held for a minimum of three years.
- Capital Gains deferral on gains realised on the disposal of any asset which is reinvested in an EIS eligible company.
- Inheritance Tax exemption on shares held for a minimum of two years.
- Loss relief, should the company you’ve invested in fail, equivalent to your tax bracket multiplied by your ‘at risk capital’ (the total loss on the shares once income tax relief has been accounted for).
- Must be an unquoted company i.e. not listed on the LSE or any other recognised stock exchange. AIM and Plus Markets are not considered quoted.
- Must not be controlled by another company.
- May not control companies which are not qualifying subsidiaries – a qualifying subsidiary is one which is over 50% held and not under the control of another company. However, a subsidiary which applies the EIS monies must be at least 90% owned, as must a property managing subsidiary.
- Must not have gross assets of more than £15m before the EIS share issue or £16m immediately after a share issue.
- Must have fewer than 250 full-time employees (or their equivalents) at the time the shares are issued.
- Must have a ‘permanent establishment’ in the UK (after 6th April 2011).
Enterprise Investment Schemes (EIS) can offer investors access to Film Investment with EIS.
A recent Article from the FT Adviser makes the case for Film Investment with EIS to be the next big EIS investment vehicle. The article favorably compares the anatomy of Film Investment with EIS with Investing in Solar Energy. It compares key investor topics like highly dependable and predictable exits, investments rollovers, low investment risk. If done well, investing in film and television projects through an EIS can generate secure, low-risk, dependable returns.