INTELLIGENT FILM INVESTMENT
Each of our five films is individually built from the ground up to ensure that they are commercially viable vehicles. There are numerous elements built into each film to ensure that all of our movies are made under budget and with the correct star power both making and starring in each film. We also attract various soft monies from the countries we film in (non-repayable funds) and there are also handsome tax rebates for all UK tax payers.
Let’s start with the Income Tax Rebate.
Our film slate comes under the governments SEIS and EIS tax schemes. We have outlined below the types of benefits you can expect when investing in these schemes. We will talk you through the spreadsheet.
INCOME TAX REBATE
Here you can see that if you invest £10,000 under SEIS you will be entitled to a 50% Income Tax Rebate, whilst under EIS you will be entitled to a 30% Income Tax Rebate giving you security on £5,000 and £3,000 respectively, (only the first £150,000 raised is applicable for SEIS). Please note that both of the rebates are only available to investors that have paid the equivalent amount of Income Tax and have not already utilised their tax rebates with other SEIS or EIS schemes.
INSURANCE – LOSS RELIEF
After the Income Tax Rebate, the schemes offer a further 45% (Up to 45% depending on your tax bracket) loss relief on the remaining amount invested. For example, the spreadsheet below under SEIS shows an Income Tax Rebate of £5,000 on an investment of £10,000. Up to 45% of the remaining £5,000 pounds is insured under the government’s loss relief scheme. This gives you security on £2,250 under SEIS and £3,150 under EIS.
TOTAL AMOUNT EXPOSED TO RISK
Under the SEIS scheme, 72.5p in every pound invested can be ring fenced against loss, resulting in just £2,750 in every £10,000 is exposed to risk. The EIS scheme can ring fence 61.5p in every pound resulting in £3,850 in every £10,000 exposed to risk.
NO CAPITAL GAINS TAX
During the life of the SEIS / EIS company (usually 3 years) your profits will not be applicable to Capital Gains Tax. You will be applicable for CGT once the SEIS / EIS company has closed.
Funds that are non-repayable are referred to as ‘soft money’. Soft money arrives from tax credits, incentives, rebates and subsidies. When you film in certain countries, they will offer to subsidise a percentage of your budget as you are providing local jobs etc. The UK offers approximately 18% of the film’s budget as soft money, while shooting in Canada can attract 27.5% soft money. This means that projects that can be creatively shot in Canada offer the best option.
Each of our films will aim to achieve a minimum of 27% soft money. In real terms, this means that we can make a £2M film for £1.46M passing bigger returns back to you the investor.
COMMERCIALLY VIABLE BUDGETS
It’s common for production companies to make a movie that they believe will be commercially successful. However, what happens when the film does not achieve the expected sales. Early on in the production process all of Bad Penny Entertainment movies are presented to our sales agent to ascertain the expected sales value. Once we are aware of how much our film could potentially gross, we formulate our budgets to include a 20% profit margin, thus creating a budget that relies on the minimum value of the movie.
COLLECTION AGENT MANAGEMENT AGREEMENT – C.A.M.A.
This is an important document that all film investors need to be aware of. The C.A.M.A. agreement is one of the key documents in film finance. It’s a central agreement between all parties who have a financial interest in the movie. This document designates how funds will be returned to everyone involved.
The collection of funds is handled by a third party company (collections agent) who make sure that the C.A.M.A is followed to the letter. This is to protect investors by making sure that every penny that our films make is returned as agreed.
I hope this gives you a clearer idea of why investing in our slate of films is a prudent move.