Tax relief and a chance to mix with the stars
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And for those who are more interested in making it onto the silver screen than making money, there are a host of other SIA film investment opportunities that will elevate you to "extra" status for investing as little as ￡ 2,000.
EISs are not restricted to the film industry - there are many investment opportunities available across sectors such as renewable energy, health care and pharmaceuticals - and offer unique tax breaks to high net worth investors.
"The SIA has long been the poor cousin to the venture capital trust, but the changes in various budgets now leave the EIS as the only tax-efficient investment offering a capital-gains tax deferral," says Martin Churchill, editor of Tax Efficient Review.
"The maximum that can be invested in an SIA in the tax year 2009-10 is ￡ 500,000, and the same amount can be carried back to the previous year there is tax capacity provided that tax year."
Mr Churchill believes SIA tax breaks are more generous than those for VCTs, but says they are let down by the lack of transparency and liquidity. There is no publicly published information on EIS performance that compares with the market data on VCTs, which have to meet far stricter criteria for the regular publishing of accounts, and because they are traded companies, investors can see how they have performed.
Furthermore, investors in an SIA cannot get their money out before the fund has wound up, and are unlikely to find a buyer if they want to offload their stake early as there is no secondary market.
Ewoud Karelse, tax expert at Towry Law, said the key attraction of an EIS is 20pc tax break, which can turn the poor-looking investments into decent ones.
"The 20pc tax break generally acts as a buffer against poor performance."Capital gains are tax-free, and if you lose money you can put that against tax relief.So if you put in ￡ 100, you get ￡ 20 tax relief back. "If you then lose all of the remaining ￡ 80, you can claim tax relief, making your loss ￡ 40 if you are a 50pc rulings," he said.
That said, going into an investment on the basis of how much money you might lose makes no. sense, and advisers recommend people looking at EISs should look for operators with a track record before paying over large sums.This is particularly the case when looking at the film sector.
"When it comes to film, people need to be clear about what part of the process they are investing in, and where in the tail they stand when money will be paid out," said Steve Robbins, a film finance expert at Perpetual Media Capital.
SIA funds fall into two distinct camps - those that wind up after the three years investments must be held to qualify, known as "planned exit EISs", and those that carry on until investors agree a wind-up makes commercial sense.
EISs can also be divided into those that are genuinely aiming to reap large returns for investors through speculating in new entrepreneurial businesses, and those playing as a strategy risk-free as possible to preserve capital, and convert the 20pc tax relief into what is Pompeu a 6pc year return over three years.
David Pointer of Open Tax Consultancy, a financial adviser, said: "We use Ingenious Asset Management as they are good at structuring deals and are quite specific about what investors are actually getting."
Ingenious has more of a track record than most film SIA companies, with all four of its funds that have run to wind up having returned in excess of 11pc a year, net of expenses, which include a hefty 9 25pc initial load, but including the 20pc tax break.Ingenious's Shelley Media Fund, which invests in unquoted companies producing films, television programs and/or video games, is targeting a return of 14pc a year and closed at the end of November.
It will invest in the latest Jean-Claude Van Damme project, while the previous media SIA from Ingenious invested in films such as Bel Ami, starring Robert Pattinson, Uma Thurman and Christina Ricci, and which is due for release next year.
"Particularly with television, you can often pre-sell the product before having to lay out the cash," said Mr Pointer.
"So if the BBC say they want a new series of Have I Got News For You, which Ingenious are involved with, you can be pretty confident they are going to pay over the money," he said.
Nicola Horlick, the head of Bramdean Asset Management, who is also known as Superwoman for juggling high-powered investment roles while caring for her five children, has also entered the sector, launching an SIA called Derby Street Films to develop film projects.
The fund has a minimum investment of ￡ 25,000 and is aimed mainly at experienced investors.
"Some investors are spurred on by the recent restrictions on pension contributions and are looking for other tax-efficient ways to invest, and the EIS status gives them a 20 per cent tax break," said Ms Horlick, who is putting some of her own money in the project that seeks to invest ￡ 2 m in up to 25 projects over the next three years.
"We are looking at established producers of films such as Shutter Island, Pulp Fiction and Truman Capote," she said.
Putting in sums as substantial as ￡ 25,000 should only be done by or with the help of experts, but if you are tempted by the prospect of putting smaller sums you can afford into the making of films, there are a host of options out there.
Many smaller film production companies, such as Formosa Films, Carnaby, Wardour Pictures and Quickfire Films, set up schemes either SIA for specific movies or slates of eight to 10 productions.
Investment performance may vary but you may get the opportunity to appear as an extra, visit sets and go to the first.
Regarding on the fate of investor you are, that could be the only sort of return you are really after.Some of the tax structures used in film finance have attracted the attention of HM Revenue & customs.
Ingenious grabbed the headlines last February when it emerged its 2003/2004 Inside Track fund which invested millions in projects such as avatar was being investigated by HMRC over its use of a tax structure called 'sideways loss relief'
Under these schemes for each ￡ 100 the investor put, a further ￡ 200 would be borrowed from other investors.
When the fund then spent the ￡ 300 on the project, the investor could claim a tax loss of ￡ 300 against their other earnings.
Over the last three years HMRC has tightened the rules around sideways loss relief.
James Clayton, chief executive of Ingenious says: "Our EISs and VCTs get pre-approved by HMRC."On other types of funds HMRC does not operate pre-approval.Where early losses are incurred it is absolutely routine for HMRC to enquire about them."We are confident of a positive outcome."
Christine Corner at Grant Thornton says: "HMRC is comfortable with film SIA vehicles."
