TaxPersonal TaxFilm tax write-offs prove a big hit

Film tax write-offs prove a big hit

Spy blockbuster Engima, which premiered in London last night, is one of the latest British films to benefit from sale and leaseback partnerships promoted by accountants.

Accounting firms both large and small are having great success in persuading clients to invest in British-made films to obtain 100% tax write-offs. Sale and leaseback partnerships set up by investment boutique Pinder Fry and Benjamin raised Pounds 260m between October 2000 and the April 2001.

Tracy Benjamin of PFB told a seminar hosted by the ICAEW that the idea had been successfully marketed across a wide spectrum of firms, from small to mid-tier, as well as by two Big Five firms.

‘We are actually finding that these partnerships are oversubscribed,’ he added.

Under sale and leaseback partnerships, the partnership purchases the master negative of a British-certified film and leases it back to the producer for the next fifteen years allowing for the film to be distributed abroad and sold to video and television networks.

The 100% tax relief for sale and leaseback arrangements was introduced by the government in the 1997 Finance Act and applies to British-made films that cost a minimum of Pounds 15m to make.

Benjamin said each partnership involved 300 or more subscribers who invested in 25 British films, certified by the Department of Culture, Media and Sport. Most recently, Enigma the code-breaking thriller starring Kate Winslet and produced by Mick Jagger, has been bought under such an arrangement.

Subscribers to such partnerships are high-earners who must invest a minimum of Pounds 100,000. The Inland Revenue then repays the taxpayer a full rebate, resulting in a substantial cash back.

An investment of Pounds 100,000 would require the subscribers to put in Pounds 17,000 of their own money, with the rest financed through a bank loan. The Revenue would then reimburse the taxpayer Pounds 38,000 resulting in a profit cash flow of Pounds 21,000.

‘This money could then be used to pay off a mortgage or invested in a portfolio,’ Benjamin said. ‘Tax deferred is tax saved.’

Furthermore, if the films are profitable, the partnership shares in a small part of the economic benefits, but is not adversely affected if the film bombs at the box office.

Harry Hicks, a partner in mid-tier firm Baker Tilly’s media practice, said the scheme was so successful that the DCMS had increased its resources assigned for certifying films. Last year, the government office took up to four months to complete this process, but Hicks said he expected ‘no similar problem this year’.

And in the March Budget, the government extended the 100% write off for British film production to July 2005.

‘We only lobbied for another two years, but the government gave us three more years,’ said Hicks.

‘This an idea the Revenue likes,’ he added.

Links

British movie business suffering under tax regime

Related Articles

Inheritance tax is 'unfit for modern society' and should be abolished, says think tank

Personal Tax Inheritance tax is 'unfit for modern society' and should be abolished, says think tank

3w Alia Shoaib, Reporter
Rent-a-room relief – the survey says…

Personal Tax Rent-a-room relief – the survey says…

2m Helen Thornley, ATT Technical Officer
What should the OTS prioritise in its review of inheritance tax?

Personal Tax What should the OTS prioritise in its review of inheritance tax?

4m Alia Shoaib, Reporter
LITRG urges government to consider tax changes in disability work plan

Administration LITRG urges government to consider tax changes in disability work plan

5m Lucy Skoulding, Reporter
HMRC appeal rejected in Tottenham Hotspur case

Administration HMRC appeal rejected in Tottenham Hotspur case

6m Emma Smith, Managing Editor
HMRC urged to clarify impact of income allowances on Self-Assessments

Personal Tax HMRC urged to clarify impact of income allowances on Self-Assessments

7m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

8m Emma Rawson, ATT Technical Officer
Wealthy individuals could circumvent top tax rate rises

Personal Tax Wealthy individuals could circumvent top tax rate rises

9m Alia Shoaib, Reporter