Oxford Capital has launched an EIS which will invest in film sales agents, with an initial capacity of £10m.
The Oxford Capital Media EIS aims to achieve a tax-free return of up to 120 per cent after four years, plus income tax relief of 30 per cent of the amount invested.
The EIS will hold its first investment close before the end of this tax year to allow participating investors to carry back the EIS income tax relief to the 2015 to 2016 tax year.
The EIS will invest in companies that trade as sales agents for independent film and television productions and has already identified two companies which have obtained advance assurance of EIS qualification from HM Revenue & Customs, the company confirmed.
Those companies selected within the EIS will work for a range of different productions, which the company said would diversify investor risk.
In a statement, Oxford Capital expressed confidence the UK media sector had longevity and offered “depth of opportunity” for investors.
David Mott, managing partner at Oxford Capital, said: “We’ve known for a long time that the sector was a good match with our extensive EIS expertise but we also only wanted to launch our Media EIS when we had lined up real investment opportunities with advance assurances in place.”
Oxford Capital confirmed the companies selected will earn revenues from the sale of distribution rights and stated they will “often be able to make a profitable return even from productions that underperform, as well as enjoying increased returns from films that are commercially successful”.
Mr Mott said: “We are laying the groundwork for future tranches of the Media EIS which could invest in music, audio production, games development, live performances or other creative trades.”
Subject to capacity, the current £10m will remain open in the new tax year, with share purchases taking place around once per month.
Jason Hollands, managing director at Tilney Bestinvest, observes both venture capital trusts (VCTs) and EIS are faced with “a squeeze” at the moment.
He said: “Demand for alternative tax-efficient products has been boosted because of the new tapered annual pension allowance for higher earners and cut to the lifetime allowance, but capacity has been constrained because of the more restrictive universe of deals created by the rule changes in the November 2015 Finance Act.
“VCTs and EIS have many similarities, with both investing in businesses subject to the same criteria, and both providing a 30 per cent income tax credit.
“But as financial planning tools, the utility of EIS is really about estate planning – since EIS companies qualify for business property relief, which means that after two years they become exempt from an investor’s estate for inheritance tax purposes – and deferral of a capital gains tax liability.