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Independent film funds an investment of the future, say Guernsey experts

As traditional Hollywood studios struggle to assemble funding – MGM has been forced to postpone the 23rd film of the James Bond franchise because of debt problems – more and more financiers are looking to the independent film fund model for reliable returns, according to Guernsey-based tax expert Ben Tustin.

Investment opportunities in films range from pre-sales contracts to tax credits, direct equity investment, gap and bridge finance, completion funds, publicity and advertising.
 
Each stage has its own balance and level of risk and reward. Direct equity investment has been historically common but is not the most lucrative or reliable form of investment, Tustin argues. Instead, film funds that spread risk in an informed way are the way forward.
 
“Knowledge of the industry is important – who are the advisors, whether they are known in the industry, what have they done before,” he says. “The best kind of due diligence is to ask someone who knows.”
 
While large studios can finance a film or series of films, they have susceptibilities that independent film producers don’t.
 
“Studios are able to sustain large financing structures, but it can take only half a dozen less popular films to cause funding problems – as has happened recently at MGM, where the Bond franchise is now on hold,” Tustin says. “So more and more film production professionals are starting to look at the independent financing model.”
 
He and other finance industry professionals have set up Guernsey Film to provide investors with infrastructure and knowledge to tackle the financial aspects of film-making.
 
The many stages, forms and degrees of risk in film financing mean that detailed knowledge of the sector and the players in it is essential in any service provider, Tustin says.
 
Guernsey Film, a joint venture between the island’s financial services industry and government, initially considered the possibility of tax credits to encourage the shooting of films in the island, b it soon became clear that financial and legal experts already working on independent film production in the island could offer a more comprehensive one-stop shop to structure tax-efficient film investment, says Tustin.
 
“A combination of law, banking, tax, insurance and fund management expertise means that Guernsey Film represents the balance of financial services in the island,” Tustin says
 
Tustin is co-chairman of Guernsey Film alongside Richard Garrod (pictured), a former head of the film tax team at Mazars who recently moved to Guernsey. “Financing films is always a delicate balance between the various parties involved in making the film and bringing it successfully to its target audience,” Garrod says. “You need to work with people who understand the film industry and have the relevant experience.
 
“Within Guernsey there are tax-efficient and commercially viable structures available across the board from production to distribution, offering your investors the ability to be involved at all levels in a tax-neutral environment.”
 
Guernsey Film will hold a promotional event at London’s Charlotte Street Hotel on September 30 featuring the chief executive of Future Films, Stephen Margolis.

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