Jersey has become a thriving base for film financing, a trend which look set to grow over the coming months. Studios are financing through the UK in greater numbers and many are choosing to use Jersey limited partnerships within their structures to maximise their UK tax reliefs. This has provided a consistent and profitable source of work for many local corporate service providers, banks and their legal advisers.
Investment in the UK from overseas-based studios and production companies increased in 2006 by 83%, in real terms, by £570 million. 2007 could be the Jersey’s most lucrative film year ever because the UK HM Treasury will continue to offer up to 20% tax relief for small budget films, whilst big budget films costing over £20 million will receive up to 16%.
The new rules for the taxation of film finance production, and a new tax relief for the production of British films were introduced by the Finance Act 2006. They apply to films which commenced principal photography before 1 January 2007, but have not yet been completed.
The film finance structures are attractive for investors hoping to maximise tax relief on their UK income. Such individuals invest in films which qualify as British films, able to take benefit of the tax credits and reliefs offered by HM Treasury to the production companies. The use of Jersey limited partnerships provides further opportunity for the individuals to receive the benefits of their investment in a taxefficient manner.
There are other international film finance opportunities for the Jersey, as yet only lightly tapped. Other jurisdictions offer tax credit schemes for film finance, similar to that of the UK, including Australia, South Africa, Luxembourg, Canada and some U.S. states. The benefits gained to the production companies and their group entities can, in certain circumstances, be routed through Jersey vehicles to maximise tax efficiency for investors.
Beyond this, the new protected and incorporated cell company structures could provide interesting and useful alternatives for film finance, by allowing one production group to put several films in separate cells, utilising a group funding arrangement and thereby minimising costs.
In addition, Jersey investment funds are being used to hold both film rights and to provide loan facilities, bridging loans and gap financing for film productions. There is considerable scope for growth in the Jersey funds market for investment in both foreign film rights and other media finance arrangements. Ozannes’ has recorded a marked increase in film finance instructions, particularly film finance fund work, over the past three months, a trend which happily looks set to continue.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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