Tuesday, 17 March 2015

Why are UK taxpayers funding films?



Syndicate Room, a UK based ECF platform that specialises in linking VC investment with crowd investment, has just completed a pitch for £1.8m.

'Salty' will be a new film directed by Tomb Raiders' Simon West. Salty Ltd has been set up to make the flic and then distribute the profits to shareholders. Its based on a novel by Mark Haskell Smith, an American. The novel's reviews are very limited, so not exactly a best seller.

Ignoring the tiny $10m budget, the fact that West has never made a comedy and that reports suggest some of the $10m will come from pre sales of the film (that is some assumption), we would like to highlight the tax issue.

EIS was set up by the UK Government to stimulate private investment in UK businesses. Any UK tax payers can obtain an instant 30% rebate on their income tax for that year, against the amount they invested. Participants then have to hold these shares for three years. HMRC control this and the seed investment version SEIS. It is not free money - the total rebate from ECF and SEIS will have to be shared by all UK taxpayers.

Simon West is currently working on a remake of the The Blob - it seems a few projects have slipped in recent years  - for example Johnson the Rock in Protection, which as far as we can tell has never been released. So Salty will not be made anytime soon. Reports say that West wanted to try a non block buster approach. We wonder whether the shine from Tomb Raider and Con Air hasn't become a little tarnished?

Is this really what EIS was designed to do, promote one off, high risk, meaningless projects? What if the budget, which is by far the smallest West has ever worked with, proves unworkable? The project will fail and the £600,000 of UK taxpayers money will be wasted. Salty Ltd will have failed before it even begins.

The film is to be shot in exotic locations,; the novel is based in Thailand. So no real benefit to the UK there. The author is American. The stars - who knows if it will get that far.

Syndicate Room make a feature of the fact that investors can reclaim the tax in this tax year. What will Salty Ltd have achieved by 5 April 2015? The potential return is only there because of this 30% rebate.

If people want to feel part of the Hollywood Set, then let them. But dont use UK taxpayers money when we are constantly being told this is a time of austerity.

PS - readers of our other posts will know that a similar one off project Water Babies, which raised £1m, drowned without trace. At least Water Babies was a UK inspired and UK based project.

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