Invest
Film 1st is looking for investment to finance our feature film Eve.
Eve is…
A British comedy about two 18 year old girls striving to come of age against the backdrop of their Jehovah's Witness families, Liverpool's thriving lifestyle and a range of well observed characters. Those in the film industry believe it has the potential to mirror the success of 90s British comedies such as East Is East, Brassed Off and The Full Monty.
The casting for the piece is well underway with commitments from some of Britain's finest established acting talent along with outstanding young actresses all of whom have been drawn to the script's vitality.
Eve will have broad appeal across genders, generations and social classes. It arrives during an age when British cinema's creative talents are immensely well-respected across the globe and Eve can further enhance and build upon this growing reputation.
Film 1st are...
A combination of youth and experience, dynamism and caution; a cocktail of energy, desire, talent and ambition. The principals of Film 1st have industry connections on both sides of the Atlantic with existing short films in circulation and projects in development in Europe and the US. Creatively driven by Daniel Fitzsimmons and Neil Atkinson, Film 1st combines this with prudent management from Jim Fitzsimmons and his team of experienced professionals in the areas of law, finance and compliance.
The Offer
The company is seeking to raise up to a net £950,000 after expenses of up to £200,000. The company has received Advance Assurance from HMR&C that the issue of shares will qualify for EIS relief. An example of possible EIS benefits for the investor are summarised below. This is no guarantee that you will qualify for relief as described and we insist that all investors seek independent financial advice before proceeding to invest in our project. For full details of how you can invest please contact us.
Supplementary Benefits for Investors
'B' Shareholders will have the opportunity to:
- have exclusive access to news of the Film's progress via weekly updates on the Film 1st website
- visit a location of the Film while shooting, have lunch with the crew and meet the cast
- Participate as extras subject to the production schedule
- attend, with a guest, a private screening of the completed Film
- attend a reception to celebrate the completion of the Film hosted by the Company, accompanied by cast members subject to their availability
- receive a signed copy of the screenplay from the writer/producer/director team Neil Atkinson and Daniel Fitzsimmons.
Enterprise Investment Scheme (EIS)
The following is a brief introduction into how an EIS works. For full details please visit www.hmrc.gov.uk/eis/. Also the Enterprise Investment Scheme Association website has some good information: www.eisa.org.uk.
The Company intends to operate within the restrictions laid down by the EIS legislation so that EIS tax reliefs can be claimed by certain of the Investors (subject to a maximum of 100 B Shares qualifying for tax reliefs as noted above).
The Company has obtained Advance Assurance from HMRC in a letter dated 14th December 2010 that the issue of the B shares will qualify for EIS relief based on information provided (though Investors should note that a maximum of 43 B shares may qualify for EIS relief). Where appropriate the Company will also seek Advance Assurance under the CorporateVenturing Scheme in regard to any specific proposal for a Shareholder under CVS.
To obtain the tax reliefs described below it is necessary to subscribe for fully paid-up new ordinary shares in a qualifying company and to claim the relief. Please note that the value of relief available will depend upon the investor’s individual circumstances. This summary (which is based on current understanding of the relevant legislation) only gives a brief outline of how the reliefs operate and assumes that the investor is subject to 40% tax on their income (2009/2010 higher rate). This guideis not a substitute for the investor obtaining professional tax advice.
1. EIS Income Tax Relief
Providing a qualifying investment is held for three years from the date of issue or from when the trade commences, if later, individualsmay obtain income tax relief on up to £500,000 of the amount subscribed for shares in the tax year 2009/2010. The relief is given at 20% of the amount invested and cannot exceed the individual’s income tax liability. Individual investors are able to make a claim for EIS income tax relief to be carried back to the preceding tax year and the legislation in this respect has changed recently. It is now possible to invest up to £1,000,000 and claim £500,000
EIS income tax relief in the current tax year and £500,000 in the previous tax year (to the extent that the individual had not reached their annual investment limit for that year), provided all other EIS conditions are satisfied.
2. Exemption from Capital Gains Tax (CGT)
Any capital gains realised on disposal after three years from the date of issue of the shares (or the commencement of trading, if later) on which EIS income tax relief has been given and not withdrawn are free from capital gains tax.
3. Loss Relief against Income or Gains
Tax relief is available to investors where there is a loss on a disposal at any time of shares on which EIS income tax relief has been given and not withdrawn, provided the relevant requirements of the legislation have been satisfied. The amount of the loss (after deduction of income tax relief) can be set against the individual’s gains or net taxableincome in the year in which the disposal occurs, or against net taxable income of the previous year or in both years (up to the amount of the loss). A claim must be made by the individual, which specifies the way in which the loss is to be utilised. Any excess can be carried forward as a capital loss to be set off against future capital gains.
4. Capital Gains Tax Deferral
To the extent to which a UK resident investor (an individual or trustees of certain types of trust) subscribes for qualifying shares, he/she can claim to defer paying capital gains tax on all or part of a chargeable gain arising from the disposal of any asset. Although there is an annual investment limit of £500,000 for EIS income tax relief a gain may be deferred even if the amount of the gain exceeds the £500,000 (up to the £2 million limit). The qualifying subscription must be made within one year before or three years after the date of the disposal which gives rise to the gain or the date when a previously deferred gain crystallises.
The gain is then deferred until a chargeable event occurs such as disposal of the EIS shares or a breach of the EIS rules. The investor must be UK resident or ordinarily resident for tax purpose both at the time of the original gain and at the time shares are issued. The deferred gain that comes back into charge will be assessed to capital gains tax at the rate of tax in force at the time of the chargeable event. Please note that this could be higher or lower than the rate currently in force, which is 18% (2009/2010 rate).
Following the issue of EIS shares and after the Company has traded for four months, theCompany can apply to HMRC for authorisation to issue tax relief certificates (Form EIS 3) to investors. The time taken by HMRC to grant authorisation cannot be controlled by the Company.
5. Inheritance Tax and Business Property Relief
Provided a shareholder has owned shares in a qualifying unquoted company for at least two years 100% business property relief should be available. This reduces the inheritance tax liability on transfers of value to nil.
Example
Please note that the examples given in this section are illustrative only and that at all relevant times the Company and the investor qualify for EIS relief. The illustrations do not apply to the shares which do not attract EIS relief. They are not and should not be construed as forecasts of the likely performance of the investment described in this document.
1. How you can benefit
Eligible Investors should be able to benefit from various EIS tax relief as follows:
| Type of Relief | Maximum rate | Maximum annual investment | Maximum tax you can save |
|---|---|---|---|
| EIS income tax relief | 20% | £500,000 single person | £100,000 single person |
| EIS capital gains tax deferral | 18% | No upper limit |
Capital Gains Tax - Can defer up to 18% of the amount invested |
2. How much tax therefore can I potentially save/defer when I invest?
| Amount invested | Tax Relief | Net cost to Investor | |
|---|---|---|---|
| (i) Investors claiming EIS income tax relief | £100,000 | £20,000 | £80,000 |
| (ii) Investors claiming EIS CGT deferral | £100,000 |
£18,000 (CGT deferred payable at the rate in force at the time when the investment is realised or ceases to qualify) |
£82,000 |
| (iii) Investors claiming both EIS income tax relief and CGT deferral | £100,000 |
£20,000 (income tax relief) £18,000 (CGT deferred payable at the rate in force at the time when the investment is realised or ceases to qualify) |
£62,000 |
Eligible Investors may therefore be able to combine the above reliefs so as to achieve initial relief of 62p in the £1.
Examples (ii) and (iii) are calculated on the assumption that an Investor would otherwise pay tax at 18% on the chargeable gain. It should be noted that the rate of capital gains tax applied to a deferred gain that comes back into charge on the occurrence of a qualifying event may be higher or lower than the 18% rate used in the illustrations in this document.
3. What would happen if I were to sell my B Shares after three years at a profit?
You will not have to pay capital gains tax on any capital gains made from the sale of your B Shares which received EIS income tax relief after three years from the issue of the shares (or commencement of the Company trading, if later) provided that the Company retains its EIS investment status throughout this period.
The tables below demonstrate the percentage returns (in the following tables return includes the initial capital) that an Investor would receive if his/her B Shares were sold at £1.50 per share compared to the original purchase price of £1.00 per share.
For more information relating to the Enterprise Investment Scheme please visit HM Revenue & Customs
| Table (a) | |
|---|---|
| Net cash amount invested for 100,000 B Shares (assuming only income tax relief at 20% applied) | £80,000 |
| Cash received from sale of 100,000 B Shares | £150,000 |
| Net cash profit received from sale of 100,000 B Shares | £70,000 |
| Percentage return on net cash amount invested | 87.5% |
The example given in table (a) assumes only income tax relief at 20% has been applied.
| Table (b) | |
|---|---|
| Net cash amount invested for 100,000 B Shares (this assumes both CGT deferral at 18% and income tax relief at 20% have been applied) | £62,000 |
| Cash received from sale of 100,000 B Shares | £150,000 |
| CGT payable at 18% on deferred gain | £18,000 |
| Net cash profit received from sale of 100,000 B Shares | £70,000 |
| Percentage return on net cash amount invested | 112.9% |
The example given in table (b) assumes both CGT deferral at 18% and income tax relief at 20% have been applied plus CGT payable on crystallised deferred gain at 18%.
4. What would happen if I were to lose money?
If an Investor's B Shares are disposed of at a loss (to the subscription price) the allowable loss for capital gains tax purposes is calculated by reducing that loss by the amount of the EIS income tax relief. The reduced loss can be set against gains or by election against income. The tables below demonstrate the loss an Investor would incur if his/her B Shares which received EIS income tax relief were sold at £0.50 per share compared to the original subscription price of £1.00 per share.
| Table (a) | |
|---|---|
| Net cash amount invested for 100,000 B Shares (assuming only income tax relief at 20% applied) | £80,000 |
| Cash received from sale of 100,000 B Shares | £50,000 |
| Tax Relief at 40% on net loss set against income | £12,000 |
| Net cash loss on sale of 100,000 B Shares | £18,000 |
The example given in table (a) assumes only income tax relief at 20% has been applied.
| Table (b) | |
|---|---|
| Net cash amount invested for 100,000 B Shares (assuming both CGT deferral at 18% and income tax relief at 20% applied) | £62,000 |
| Cash received from sale of 100,000 B Shares | £50,000 |
| CGT payable at 18% on deferred gain after loss on EIS shares | £18,000 |
| Tax Relief at 40% on net loss set against income | £12,000 |
| Net cash loss on sale of 100,000 B Shares | £18,000 |
The example given in table (b) assumes both CGT deferral at 18% and income tax relief at 20% have been applied plus CGT payable on crystallised deferred gain at 18%.