It appears the use of EIS for funding UK film may be under fire on 22nd November. In a similar way as the withdrawal of Section 48 the Treasury may be taking a dim view of the use of EIS for film, which accounts for roughly one third of EIS funding in the UK.
While not open to the same level of 'abuse' as Section 48 I have come across one fund (no names) whose intention is that investors are able to withdraw their money before the first day of principle photography, clearly not the intention of using EIS where capital must be placed at risk. This may have led to the accusation that the use of EIS in film is 'asset backed' i.e. since UK films also benefit from 20% tax relief investors are able to double dip - get tax relief on the way in, and benefit from relief while in the fund. Indeed they can also benefit if they lose their shirt, and get relief on any loss. A final part of the argument I have heard is that this extends to the use of pre-sales - that the EIS capital is not really at risk as it is backed up by pre-sales on the film.
All this doesn't stack up to a 'hill of beans' in the real world UK film finance. The truth is pre-sales are non existent, minimum guarantees not worth the paper they are written on, and the tax credit only applies to money spent in the UK; fine if we are to go on remaking 'The Kings Speech', but lacking in ambition for a global economy outside the European Union.
Instead of the baby and the bathwater perhaps the treasury should look at it's own rule book: smart people in the Square Mile get paid to find tax efficient funds for their clients and it is neither theirs, nor ours in the film industry, fault if some of this turns out to be very close to the wind of tax evasion. My own thought is that EIS investor capital has to remain in the fund for an individual film, an equity investor is always going to be in a lower recoupment tier than say a distributor, or debt, and their capital will always then be at risk. We will wait for the budget, but it would be a sad day for British film if this independent source of funding were removed.
Tom Petch is a writer/director. His film 'The Patrol' (2013) was part funded by EIS and filmed in Morocco.