When approached from a market perspective, the entertainment industry is an interesting asset class that has the potential to vastly outperform other sectors
The Pratik Shelar Film Company is strategically positioned to operate across both markets—leveraging Indian IP with Western scalability, explosive market growth and surging investor interest in diverse, authentic content.
To access generous U.K. tax reliefs providing capital gains deferral and downside protection. Through the Enterprise Investment Scheme (EIS) eligible investors can claim up to 30% income tax relief on investments up to £1 million per tax year.
The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) are UK government schemes designed to help smaller higher-risk trading companies raise finance by offering a range of tax relief to investors who purchase new shares in those companies.
If the shares are disposed of at a loss you can elect that the amount of loss up to 45% be set against any income tax of that year or of the previous year. EIS also provides 100 per cent exemption from inheritance tax
1. Income Tax Relief
There is no minimum investment through EIS in any one company in any one tax year. Tax relief of 30% can be claimed on investments (up to £1,000,000 in one tax year) giving a maximum tax reduction in any one year of £300,000, provided you have sufficient Income Tax liability to cover it.
EIS allowances are allocated individually; therefore a married couple could invest up to £2 million each tax year and be eligible for Income tax relief. The shares must be held for at least three years from the date of issue or the tax relief will be withdrawn.
2. Capital Gains Tax exemption (CGT)
Any gain is CGT free if the shares are held for at least three years and the income tax relief was claimed on them. Shares can be held for much longer and therefore potentially enable the investor to be accrue their CGT exemption over a long period of time which can be a great attraction.
3. Loss relief
If shares are disposed of at a loss, the investor can elect that the amount of the loss up to 45%, less Income Tax relief given, can be set against income of the year in which they were disposed or, on income of the previous year instead of being set off against any capital gains.
4. Capital Gains Tax deferral relief
Payment of CGT can be deferred when the gain is invested in shares of an EIS qualifying company. The gain can be made from the disposal of any kind of asset but the Investment must be made one year before or three years after the gain arose - connection to company does not matter. Unconnected investors are eligible for relief from both Income tax and CGT referral relief.
Carry Back
There is a 'carry back' facility which allows the all or part of the cost of shares acquired in one tax year, to be treated as though those shares had been acquired in the preceding tax year. Relief is then given against the Income Tax liability of that preceding year rather than against the tax year in which those shares were acquired. This is subject to the overriding limit for relief for each year.
Claiming your tax relief
The investor claims relief once the company sends through an EIS3 form. Claims are made through the Self- Assessment tax return for the tax year in which the shares were issued.
Claims can be made up to five years after the investment after the first 31 January following tax year in which investment was made.
For more information, please see the HMRC website.
Here's a few examples of how EIS tax relief works. To make the maths easy, let's assume you invest £10,000 in each case and you're in the 45% tax bracket.
The company does well and doubles its value and you hold the shares for three years
Investment = £10,000
Income Tax relief = £3,000 (as a reduction in your income tax bill)
Capital Gains Tax = £Zero
Your gain = £13,000 (£10,000 profit from the sale plus £3,000 income tax relief)
The company value stays the same
Investment = £10,000
Income Tax relief = £3,000 (as a reduction in your income tax bill) Share sales = £10,000
Your gain = £3,000 (from the income tax relief)
The company closes and your shares are worth nothing
Investment = £10,000
Income Tax relief = £3,000 (as a reduction in your income tax bill) At risk capital = £7,000
Loss relief on at risk capital @ 45% = £3,150
Your actual loss = £3,850 (£10,000 – [£3,000 + £3,150])
The availability of any tax relief, including EIS, depends on the individual circumstances of each investor and of the company concerned. If you are in any doubt about the availability of any tax reliefs, or the tax treatment of your investment, you should obtain independent tax advice before proceeding with your investment.
Please visit the HMRC website for further information on EIS tax relief.