The scheme’s objective is to provide high-net-worth and sophisticated investors with growth with a range of tax benefits including income tax relief, capital gains tax deferral and loss relief.
The film’s production budget is £750,000 and another £50,00 is needed to cover the cost of the offer. If it raises more than the £800,000 needed to proceed with the offer, the surplus will be used to increase marketing to make the film more commercial.
The directors of the EIS believe the film should be a commercial success. Films in the horror genre tend to work on a lower budget and can be more profitable than films with bigger budgets. There is also a ready-made market of teenagers and young adult audiences who should be receptive to promoting the film before the release on the internet with trailers and teasers.
The company will recover the cost of the production from the net revenue. The film qualifies for the government’s new film tax credit, which will provide a cash rebate from the Treasury of 20 per cent of all expenditure in the UK. For Splintered, this is estimated at £140,000, which will be paid after completion of the film as the first stage in the recovery of production costs. Any net profits after the recovery of the rcst of production is split equally between the investors and those making the film.
The directors of the EIS are putting distribution rights in place and will pay an international sales agency to sell distribution rights to the film. The director say Carnaby International, which has relationships with companies such as Sony and Universal, is interested in selling the film to distributors.
Carnaby International has estimated the gross sales revenue and the directors of the EIS say that if the actual revenues are no greater, shareholders will not make a loss due to the income tax relief and film tax credit, which reduces the risk.
The company says raising money for one film is good because it is simple and makes the EIS transparent, unlike with a slate of films revenue streams are not mixed.
However, potential investors should note that this may also be a drawback because they will be relying on one film rather than diversifying across several. Although they stand to benefit if it does well, there is no guarantee that it will be a success.