Dáil Éireann Debate, Thursday - 25 October 2018
19. Deputy Bríd Smith asked the Minister for Finance if the granting of section 481 status for film productions and his Department's role in sanctioning such production will be examined in view of concerns that budgets have been overestimated to avail of the scheme; the safeguards in place to ensure this does not happen; and if he will make a statement on the matter. [39808/18]
Amharc ar fhreagra52. Deputy Richard Boyd Barrett asked the Minister for Finance his plans to make adjustments to section 481 film tax relief particularly in view of recent allegations of possible abuses of this relief and concerns that the relief is not generating the quality employment in the film industry that is required under the legislation; and if he will make a statement on the matter. [44228/18]
Amharc ar fhreagraI propose to take Questions Nos. 19 and 52 together.
Under Section 481, a company which produces a film can claim a payable tax credit of 32% of eligible expenditure, subject to certain limits.
Eligible expenditure is the amount that the producer company spends in Ireland, wholly and exclusively on producing the film. Expenditure outside of Ireland does not qualify for the tax credit. However, where the credit is calculated based on 80% of the total cost of production, Revenue must have regard to the amounts incurred outside of the State as an increased global budget can lead to an increased credit.
Recognising the potential risks presented, the administrative framework of the relief requires that a company’s application for the credit must include:
firstly an auditor’s report detailing the eligible expenditure, the global budget and details of related party transactions, and secondly a solicitor’s letter detailing that they have reviewed the legal agreements and that 68% of the funding has been lodged to the company’s bank account (a requirement prior to Revenue releasing any amounts of the payable tax credit).
Section 481 provides that Revenue may refuse to certify a film if they have reason to believe that the budget, or any part of the budget, is inflated. They may also refuse to certify the film if they are not satisfied with the commercial rationale for the corporate structure used for financing, distribution and other similar activities.
As part of this year’s Finance Bill, I announced that applications under Section 481 will be moved to a self-assessment footing to put the credit inside the normal penalty and prosecution regime where an incorrect claim is made. Further administrative changes are also being made to allow for earlier engagement with production companies in relation to the training requirements that form part of the relief.
In terms of employment, Revenue carries out a comprehensive programme of ‘outdoor’ compliance operations each year across a broad range of economic sectors, including the film industry. Many of the operations are carried out on a multi-agency basis, which can include officials from the Department of Employment Affairs and Social Protection and the Workplace Relations Commission. The primary role of these joint investigation units, JIUs, is to detect non-compliance with tax and duty obligations, which includes non-operation of the PAYE system on foot of bogus self-employment.
