Sources of Production Finance

There are a number of production finance sources as follows:-

Primary Licence

The broadcaster commissions a production and pays a licence fee for a set number of transmissions (TXs) in a defined territory.

EIS Finance

The UK currently has an Enterprise Investment Scheme (EIS) which, subject to strict rules, enables investors to obtain tax relief for the cost of the shares and which entitles them to sell the shares after a set period without incurring capital gains tax on any profit. The link to the HMRC website which gives full details of this scheme is:

www.hmrc.gov.uk/eis/

UK Film/TV tax relief

Tax relief is available in the UK for feature film production and high-end TV drama and animation.  Best practice is to seek advice from a film & TV specialist accountancy firm.  The link to the HMRC website concerning UK Film/TV tax relief is:

www.gov.uk/guidance/corporation-tax-creative-industry-tax-reliefs

Loan Finance

Loan finance for film and TV production is not generally available with two exceptions:-

a) Tri-partite agreement finance

PACT has negotiated a standard three-way agreement between the financing bank, the broadcaster and the production company whereby the bank agrees to finance a production on the understanding that, upon final delivery of the programme, the broadcaster will pay the agreed licence fee to the production. A link to the PACT website is:

www.pact.co.uk

b) Tax relief finance

There are a small number of companies and banks in the UK who are prepared to advance loans to production companies to cashflow the UK tax relief. Each company involved in this specialist form of finance has its own specific requirements concerning the project set up.

Distribution/pre-sales advances and pre-sales advances

A distribution/pre-sales advance is an agreement with a distributor who gives a minimum guarantee advance to a production company in return for securing the distribution rights for the production. If programme sales exceed a pre-set level, further distribution royalties may be paid but whatever the sales the distributor is contractually bound to pay the minimum guarantee.

Overseas tax relief

Several countries in the world offer tax relief to encourage Producers to make programmes in their country. Such arrangements are subject to change.

www.entertainmentpartners.com/incentives/

‘Soft’  money

‘Soft’ money is fairly rare and occurs where an investor provides production finance in return for rights to the income from the production. Such an investor may have a particular interest in the subject matter or may wish to invest for altruistic reasons.

Other