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HMRC have published a note to clarify the interaction of the enterprise investment scheme (EIS) and co-productions in film and television and, in particular, the eligibility of co-productions to access the EIS.
Each party in a co-production controls a part of the project and raises the necessary finance, with the majority producer responsible for collating the parts into a finished film or programme.
All parties, who usually share income in the same ratio as their input, jointly own intellectual property.
HMRC have published a note to clarify the interaction of the enterprise investment scheme (EIS) and co-productions in film and television and, in particular, the eligibility of co-productions to access the EIS.
Each party in a co-production controls a part of the project and raises the necessary finance, with the majority producer responsible for collating the parts into a finished film or programme.
All parties, who usually share income in the same ratio as their input, jointly own intellectual property.
The Revenue accepted in some instances in the past that a majority producer – one creating in excess of 50% of the production – that receives royalties or licence fees is not conducting an excluded activity and is eligible to be considered to be a qualifying company for EIS purposes.
The tax department has now confirmed that consideration must first be given to the provisions of ITA 2007, s 183 – which requires that no part of the qualifying trade is carried on by a party other than the company or a qualifying 90% subsidiary.
A film or TV show is a single product; one in a co-production is the result of activities of more than one party. The consequence is that the trade of a potentially EIS qualifying company is being conducted by another person, meaning the company will fail the test of s 183.
The stance will apply whether the production is a qualifying co-production as defined by CTA 2009, s 1186 and s 1216AI, or an unofficial one. It will not affect the entitlement to film or television tax relief of qualifying co-productions.
