U.K. regulates film funding

Loopholes closed, equity raised in moderation

The days of U.K. funds pouring billions of dollars into Hollywood movies via tax loopholes are long gone.

But companies such as Prescience, Scion and Ingenious continue to raise equity from British investors for film production, albeit on a much more modest level, working with the tight restrictions now imposed by the U.K. government.

Under the new rules, individuals must prove that they are actively involved in producing or distributing the films they back if they want to claim tax relief.

In the 2008-09 tax year, Prescience raised $135 million from such active investors, who backed nine movies: “Easy Virtue,” “Harry Brown,” “44 Inch Chest,” “Mr. Nice,” “From Time to Time,” “The Picture of Dorian Gray,” “Betty Ann Waters,” “Sex ‘n’ Drugs ‘n’ Rock ‘n’ Roll” and “St. Trinians 2: The Legend of Fritton’s Gold.”

Scion has adopted a lower profile but still helped to direct its investors into such movies as “Taking Woodstock,” “A Serious Man,” “Senna,” “Rogue’s Gallery” and a remake of “The Eyes of Laura Mars.” The previous year (2007-’08), when the rules weren’t quite so strict, it backed 19 movies, including “Burn After Reading,” “Changeling,” “My Life in Ruins,” “Frost/Nixon,” “The Last House on the Left,” “Hachiko: A Dog’s Story” and “The Women.”

Scion’s clients invest an average of $3 million apiece. The company channels equity worth a maximum 10%-15% of a film’s budget. Scion also launched a Film Opportunities Fund this January, raising no more than $14,000 from any individual. The fund invests mainly in bridge, gap and mezzanine finance, and bankrolling tax credits.

Ingenious, which is a partner in sales company Protagonist Pictures with Film4 and Vertigo, was far the biggest player before the government clampdown, raising north of $1 billion for its last fund under the old rules. It now operates a much reduced scheme, helping a few wealthy clients to invest in indie films, raising about $20 million last year for pics such as “Never Let Me Go,” “Bronson” and “New Town Killers.”

Separately and on a larger scale, it channels corporate and institutional investment into Fox projects, including “X Men Origins: Wolverine” and “Australia.”

Producer Nigel Thomas at Matador Pictures raises equity under a different tax shelter, the Enterprise Investment Scheme. EIS companies are limited to a maximum of £2 million and operate under strict rules about how they can spend the money.

Since the start of 2008, Thomas has created five such EIS vehicles — Cinema One through to Cinema Five — each of which has invested in two or three low-budget indie films. Some of these, such as “Book of Blood,” were his own productions, while others, such as “Heartless” and “Wild Target,” came from third parties.

Filed Under:

Want to read more articles like this one? SUBSCRIBE TO VARIETY TODAY.
Post A Comment 0

Leave a Reply

No Comments

Comments are moderated. They may be edited for clarity and reprinting in whole or in part in Variety publications.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

More Film News from Variety