Film Industry Tax Reliefs

Dáil Éireann Debate, Wednesday - 2 April 2014

Wednesday, 2 April 2014

Ceisteanna (64, 72, 73, 74)

Sandra McLellan

Ceist:

64. Deputy Sandra McLellan asked the Minister for Finance the number of persons employed by film companies who receive section 481 tax breaks. [15557/14]

Sandra McLellan

Ceist:

72. Deputy Sandra McLellan asked the Minister for Finance the criteria that exist for a film company to receive a section 481 tax break. [15558/14]

Sandra McLellan

Ceist:

73. Deputy Sandra McLellan asked the Minister for Finance the verification and auditing procedures in place to hold film companies to account after they have received a section 481 tax break. [15559/14]

Sandra McLellan

Ceist:

74. Deputy Sandra McLellan asked the Minister for Finance the number of persons employed by film companies who receive section 481 tax breaks; and the way these numbers are verified. [15560/14]

Freagraí scríofa

Minister for Finance

I propose to take Questions Nos. 64 and 72 to 74, inclusive, together as they all concern the operation of the film tax relief scheme.

In this regard, I am advised by the Revenue Commissioners that the details of the film tax relief scheme are contained in Section 481 of the Taxes Consolidation Act 1997. This is supplemented by the Film Regulations 2008 (S.I. No. 357 of 2008) which govern the administration of the scheme.

Criteria to be fulfilled by a qualifying film company

Under the provisions of section 481, an individual or company investing in a qualifying film, to be produced by a qualifying company, is entitled to claim tax relief in respect of that investment. For this purpose, a qualifying company is an Irish incorporated and resident company, or a company which is carrying on a trade in the State through a branch or agency. The company must exist solely for the production and distribution of one, and only one, qualifying film. A film company seeking Section 481 finance cannot have in its name the words "Ireland", "Irish", "Éireann", "Éire", or "National".

 In order to be regarded as a qualifying film, a film must meet the requirements of section 481 including criteria set out by the Minister for Arts, Heritage and the Gaeltacht in relation to the contribution which the production of the film is expected to make to, either or both of, the development of the film industry in the State and the promotion and expression of Irish culture. On receipt of confirmation from the Minister that the film meets these criteria, the Revenue Commissioners then undertake a detailed examination of the application to ensure that the project complies with the other statutory requirements. Where they are so satisfied, the Commissioners then issue a certificate in respect of the investments authorising tax relief in an amount not exceeding the lowest of:

- eligible expenditure, which is generally the amount spent on the employment of eligible individuals and goods, services and facilities in the State,

- 80% of the total cost of production of the film, or

- €50million.

Verification and Auditing Procedures

Prior to certification of a film, Revenue examine the application to ensure that:

- the requirements of the Taxes Consolidation Act 1997 have been complied with;

- contractual arrangements have been put in place to ensure that the production company has the rights to make the film;

- the project appears to be commercially viable;

- full budget details have been provided; and

- declarations are received from the company directors that there are no issues that might impact upon the conditions for relief under S481.

 Within 4 months of the completion of a film, a qualifying company is required to notify Revenue of the date of completion of the film and to provide 2 copies of the film to both Revenue and the Minister for Arts Heritage and the Gaeltacht. At the same time, the company is also required to provide a compliance report to Revenue in relation to the film. This compliance report contains, inter alia, a declaration from the directors of the production company confirming compliance with the conditions of the relief as well as a detailed line-by-line analysis of the budget for the film, identifying and giving reasons for any variations from the budget initially submitted. These declarations must be accompanied by a declaration from an independent auditor who is also required to verify the amount spent on the film.

 All of the information submitted is examined by Revenue to ensure compliance with the section 481 requirements. Where the certification of the film was made subject to specific conditions, Revenue will also examine the information to ensure that the company complied with the conditions. In addition to the examination of compliance submissions, Revenue may also audit the returns of film producer and production companies as part of their normal audit activities.

Number of persons employed in the production of qualifying films

Files maintained by the Revenue Commissioners provide data on the number of individuals who are scheduled to work on productions in a given year. These show that in 2013, just over 27,000 individual employments were generated on film productions supported by Section 481 relief. This includes approximately 20,000 employments as extras on these productions. However, this data does not show whether an individual spent a full year, a week or a day working on the production of a qualifying film. Similarly, an individual may have worked on a number of productions and would be counted in respect of each production. For this reason, it is not possible to estimate the number of full-time equivalent employees from the Revenue information.

New Film Scheme

The Deputy should also note that the Finance Act 2013 introduced changes to give Film Relief a new focus. These changes are subject to a commencement order and, in the last Budget, I signalled my intention to bring the new arrangements into operation on 1 January 2015.

Under the existing film relief scheme, an investor may claim tax relief in respect of an investment in a qualifying company. The tax relief is granted at the investor's marginal rate of tax on the full amount of their investment. Under the new provisions, the delivery mechanism of the incentive will change. Relief will not, in the future, be available to investors in qualifying films. Instead a payable Corporation Tax credit of 32% will be paid directly by the Revenue Commissioners to a Producer Company, who produces a qualifying film.

The amount of the credit will be 32% of the lowest of:

- eligible expenditure, which is generally the amount spent on the employment of eligible individuals and goods, services and facilities in the State,

- 80% of the total cost of production of the film, or

- €50million.

 The legislation provides for measures to ensure that, in the event that the qualifying company does not satisfy the statutory conditions or the conditions imposed by a film certificate issued by the Revenue Commissioners, any amount paid by the Commissioners can be recouped.