Business Expansion Scheme for Music - Guidelines
Introduction
The following guidelines have been agreed between the Minister for Arts, Sport and Tourism and the Minister for Finance and are intended to outline the criteria to be used in certifying suitable projects for the purposes of this tax relief.
Guidelines
In order to ensure orderly processing of applications for certificates, companies should submit their application to the Minister of Arts, Sport and Tourism as early as possible. Where a company also intends to apply to the Revenue Commissioners for outline approval for the project this may be done at the same time.
Where, in relation to the tax year 1996/97 and later years, a completed application is not made to the Minister of Arts, Sport and Tourism by 30th September of the tax year in which the funds are being raised under the scheme, no assurance can be given by the Minister for Arts, Sport and Tourism that processing of the application will be completed in time to meet the 31st December tax year deadline.
DEFINITIONS
Qualifying Company
A qualifying company is a company whose trade solely consists of the production, publication, marketing and promotion of a qualifying recording or qualifying recordings by one and only one new artist and which shows to the satisfaction of the Revenue Commissioners that a certificate has been given, and not revoked, by the Minister for Arts, Sport and Tourism.
Qualifying Recording
A qualifying recording means a recording produced in a studio in the State in any recording format in any musical style, including any associated video directly related to such a recording, by a new artist subject to conditions set down in a certificate issued by the Minister for Arts, Sport and Tourism under Section 16 of the Finance Act, 1984 (as amended by the Finance Act, 1996).
New Artist
A "new artist" means
(i) a sole artist, or
(ii) a group comprising more than one artist
whose total album sales in all markets have not exceeded 5000 units prior to the receipt of the application by the Minister for Arts, Sport and Tourism.
In the case of a solo artist, the total previous album sales of a group or groups of which the solo artist is or was a member will be reckonable for the threshold limit of 5000 albums. In the case of a group, the total previous album sales by any member of the group as a solo artist or as a member of another group will be reckonable for the threshold limit. However, where more than one member of the group making the application has had previous album sales, only the sales of the member with the highest number of previous album sales will be so reckoned.
An Album
An album is any published recording that comprises five or more discrete musical works or, in the event that it comprises less than five such works, the music content has a total duration in excess of twenty minutes.
BUSINESS PLAN
Certification will be on the basis of a Business Plan, copies of full legal documentation connected with the company and any other information which the company supplies to the Minister or which the Minister may reasonably request.
- The Business Plan, covering a minimum period of 3 years, should specify the main objectives of the Plan and also include details such as how the BES funds are to be spent, target markets, projected sales, financial projections, projected employment, etc., over the life of the plan together with details of associated companies where any transfer of employees or assets is envisaged in the Plan.
- It is a condition of issue of the certificate that each company submit an Annual Progress Report on the Business Plan to the Minister in respect of each of the 3 years following the share issue (or longer period if agreed with the Minister). That report is to be submitted not later than 31 March of each such year or such other date as may be agreed with the Minister. The Minister will satisfy himself that the Business Plan submitted by the company is a credible Business Plan.
- The Minister for Arts, Sport and Tourism may determine the maximum amount of money which can be raised.
- A qualifying recording must be produced in a studio in the State by the company within 12 months of a certificate being issued and published within a further 12 months.
- In considering whether to give a certificate, the Minister will have regard to the manner, extent and timing in which the money to be raised is to be used by reference to any or all of the following criteria:
- the numbers employed (full-time or full-time equivalents) at all levels of the project (rehearsal, recording, promotion, touring) - including administrators, musicians, studio personnel - who are domiciled, resident or ordinarily resident in the State and the proportion of those persons relative to the total number of persons employed at each level and stage of the project;
- the extent, type and quality of training to be afforded to individuals domiciled, resident or ordinarily resident in the State;
- the amount of the project's budget to be spent on facilities available in the State e.g. studio facilities, merchandising, graphic design, CD/tape production, etc. will be central to the evaluation of the project. It is accepted that some level of expenditure on a project outside the State may be necessary;
- the amount of management, accountancy, legal and other professional fees provided for in the contracts between the shareholder/promoters and the artist or group;
- the extent to which the project will continue to be based in Ireland while exploiting international markets. The location of management and publishing contracts, the destination of publishing royalties etc. would be of relevance here.
- In coming to a decision whether or not to issue a Certificate, the Minister may seek the advice of any person or body of persons which in the Minister's opinion may be of assistance to him/her in respect of the project concerned.
- The issue of a certificate does not represent any form of approval of the commercial viability of a project by the Minister. It may not be used to promote a project to potential investors in any prospectus or other promotional material or be given as a letter of comfort. However, in order to indicate that the Minister has issued a certificate the following standard form of wording only should be used:-
"A certificate has been issued under Section 16 of the Finance, Act 1984 (as amended by the Finance Act, 1996). This certificate does not represent any form of approval of the commercial viability of the project".
It must be emphasised that the issue of a certificate by the Minister to a company in respect of its Business Plan does not in any way imply that the company will be automatically regarded by the Revenue Commissioners as a qualifying company for the purpose of the BES or that relief will be granted to investors in the company. These are matters solely, in the first instance, for the Revenue Commissioners. - The Minister may amend or revoke a certificate or any condition thereof in the event of failure by the company to apply the funds raised under Scheme in pursuance of the main objectives of the Business Plan (subject to any significant modifications agreed with the Minister). Revocation of the certificate may lead to the withdrawal of relief granted to investors. A certificate will not be revoked at any time subsequent to 6 months following the issue of the third Progress Report to the Minister. A certificate will also not be revoked where the Minister is satisfied that the Business Plan cannot be adhered to for genuine commercial reasons or arising from adverse economic circumstances, or where the company enters liquidation or receivership for bona fide commercial reasons and not for tax avoidance purposes.
- The holder of the Certificate will be required to inform potential investors in writing of the conditions under which the Certificate has been issued.
- In all cases, it will be a condition of the issue of a Certificate that an Economic Database Form designed for all projects be completed and returned to the Minister. This database will form the basis for the ongoing critical analysis of the economic benefits brought about by the introduction of the BES to these projects.