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Newsletter | Articles HMRC Delivers Blow to UK Film Industry Despite another blow being dealt to the British film industry, the Isle of Man remains one of the leading locations to make movies. On budget day in March 2008 HM Revenue and Custom’s announced a restriction of tax relief on film investment schemes. The move means it will no longer be possible for individuals to offset losses from their film investments against their other income, unless they play an active part in the management of the film business. Senior tax manager of KPMG’s UK media practice Lucy Elwes said: “The new legislation targets individuals seeking to shelter otherwise taxable income. The UK film industry has benefited a great deal in recent years from the flow of investment through tax-driven structures. While this announcement won’t come as a surprise to the industry, given HMRC has made no secret of their dislike of these types of arrangement, it will undoubtedly have a negative effect on the funding of the British film industry.” Isle of Man Film was established in 1995 as part of the Isle of Man Government’s economic diversification policy. It is wholly owned by the Isle of Man Government and acts as an equity investor in film and television. Over recent years, the Isle of Man has become one of the busiest areas of film production in the British Isles. More than 84 films and productions have been made in the Island since Isle of Man Film was formed. The Isle of Man is a low tax economy with no capital gains tax, wealth tax, stamp duty, death duty or inheritance tax and income tax rates of 10 per cent and 18 per cent; corporation tax is at 0 per cent. Isle of Man Film aims to raise the profile of the Island's film industry and to actively market the Isle of Man as a film location. Isle of Man Film also offers discretionary financial support through its Media Development Fund (MDF), which makes equity investment available to film and television productions shooting in the Isle of Man. The MDF is run by CinemaNX Limited ('NX') and offers a broad range of film investment including advances against specific territories, discounting of tax credits and other ‘soft’ money and provision of contract discounting and ‘gap’ financing. NX does not have any upper or lower limit on its individual investments and is able to offer from 10 per cent to 100 per cent of a film’s budget. The decision is made on a case by case basis. In order to be considered for investment, the project should be able to be filmed wholly or in part on the Isle of Man (at least 50 per cent of all principal photography to take place in the Island), be capable of spending at least the equivalent of 20 per cent of the below the line budget with local service providers and be capable of being completion bonded. Isle of Man Film acts as a facilitator in assisting with the logistics of production in the Island. It has amassed a wealth of practical media experience and can assist with organising film crew accommodation, production supplies, crew and facilities and locations. This includes the use of the Island’s state of the art purpose built film studio in the north of the Island. The services ILS provides would normally range from full maintenance of statutory corporate records, to any day-to-day support necessary, whilst filming, acting or entertaining is actually in progress. ILS is able to handle and process all types of payments associated with the running of such projects. For a typical client, such as a US Film Production Company, we deal with multi-currency payments and the supply of detailed accounting information for them on a daily basis. Most activities are very carefully structured in order to recognise the need to deliver such services on a time critical basis. An important part of a creative enterprise such as this is understanding how best to manage any intellectual property and the effective routing of royalties that would normally result. Our Film/Entertainment Division at ILS has gained considerable experience in this particular field and in so doing is able to provide proven highly tax-efficient solutions. For more information on ILS’s Film Division and the services it provides see the below link: http://www.ils-world.com/services/main.shtml#film.