Thursday 23 May 2019

Film industry hits out at Revenue tax incentive shake-up

Brown Bag Films' Gaffney says new scheme puts Ireland at a disadvantage

Elaine Geraghty of Screen Producers Ireland
Elaine Geraghty of Screen Producers Ireland
Samantha McCaughren

Samantha McCaughren

The Irish film and animation sector believes that a new system for tax relief will have an extremely negative impact on the industry.

A number of sources said they were seriously concerned that a new self-assessment model would damage the industry, with the animation sector being particularly hard-hit. The main issue is that no guidelines have been published by Revenue to outline what spending is eligible for relief.

Cathal Gaffney, co-founder of Brown Bag Films, told the Sunday Independent he believed that the updated Section 481 relief scheme would have a "material" effect on the Irish live action and animation film industry.

"This is known far and wide now and has had a huge ripple among international clients. We've spoken to all major international clients and it has a number of them scared," said Gaffney. "What was a competitive advantage is now a complete disadvantage to doing business in Ireland."

Award-winning Brown Bag Films employs 300 people in Dublin and was bought by Canadian company 9 Story Media Group in 2015.

Gaffney said that the self-assessment model was to be welcomed but, as no guidelines as to which expenses are eligible for relief have been published, production companies are left open to penalties if an audit later finds they had claimed for expenses not considered to be eligible."I might try to be compliant and there is a risk that I am not. That is a risk I am not prepared to take," said Gaffney. "I have a spoken with a number of international clients and it has caused significant concern.

"If you wanted to get rid of an industry and wanted to cut it in half you would go down this road of lack of clarity and no guidelines."

John Gleeson, a leading accountant specialising in the film sector, said that there has been "consternation" among producers over the model. He said there were fears that Irish production companies could face penalties from Revenue for "innocently" claiming for expenses that had been accepted for years but were no longer considered eligible.

Gleeson heads the film and TV department of Saffery Champness Ireland, which was recently established in Dublin through the acquisition of Grant Thornton's media and entertainment practice. "Revenue has promised for over two years that they were going to provide a manual to explain and give clear guidance on what was allowable and now they have announced that they will not," he said.

Elaine Geraghty of Screen Producers Ireland (SPI) said self-assessment was a new system which the industry is trying to navigate its way through.

"On the outstanding issues that we need resolved, we are engaging with Revenue and the Department of Finance. In all of this, certainty and clarity are key."

The new self-assessment system will be administered by the Department of Culture, Heritage and the Gaeltacht, with payments still made by the Revenue.

Details of the new arrangement were outlined by Revenue and the department at a meeting hosted by the IDA.

A number of sources said there were 'robust exchanges' in the Q&A part of the event.

Revenue said in a statement: "Draft guidelines, which take account of the Finance Act 2018 changes, will be discussed with industry representatives through the Tax Administration Liaison Committee (TALC) with a view to publishing the guidelines thereafter.

"These guidelines take account of issues raised at the IDA/EI event."

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