Could films present the next EIS solution?

This article is part of
Alternative Investing - November 2014

Such films have a strong chance of making solid profits and returns for investors. It is also important to work with trusted third parties, from film producers and directors to distributors.

The theory is simple but executing such a strategy is not something just any investment manager can do. Selecting the most suitable projects and the best people to work with requires expertise and an in-depth knowledge of the UK film industry. Pedigree, experience and prudence are necessary.

An experienced film investor knows that risks can be reduced and returns enhanced by tightly structuring the terms under which money is invested. Further security can be introduced through the use of insurance to cover a proportion of a film’s pre-sales.

Like a planned-exit solar EIS, investors in a film EIS can have a high degree of confidence of being able to cash in after three years – the minimum period for investment to meet EIS eligibility – and collect a decent return. This is because it is typically in the first two or three years in which a large proportion of the sales are generated.

That being so, films and TV productions can generate revenues for many years after their release and investors in film EISs can also choose to remain in the schemes for many years to benefit from this long tail of income. They can also be eligible for inheritance tax business property relief too.

Kirsty Bell is a partner at Nyman Libson Paul, a firm of chartered accountants that specialises in the entertainment sector, and is managing director of Goldfinch Pictures

Investing in films: Why Now?

Kirsty Bell, partner at Nyman Libson Paul, explains:

“Now is a very good time to invest in film. From blockbuster franchises such as James Bond and Star Wars to must-see TV series such as Downton Abbey and Sherlock, the UK has an international pedigree of producing film and television to the highest quality. Our independent film industry is booming, too.

“At the same time, the global marketplace for film and TV programmes is growing rapidly as a result of the increasing amount of platforms and media by and through which they can be shown. This phenomenon gives rise to a huge number of possible outlets, all of which are sources of revenue for UK film and TV productions. As a result of these factors, sales of UK film and TV are growing exponentially.

“By combining film industry and EIS financing expertise and experience with a rigorous and robust approach to finances and investment selection, it is possible to benefit from this opportunity with a level of risk that is managed, compared with most other forms of EIS investment. This presents an extremely attractive replacement for the now-defunct solar EIS sector.”