Q: Des from Kilkenny – “I’ve recently heard of artists using a BES scheme to finance recordings. What does BES stand for and how do I get one started?”

A: BES stands for Business Expansion Scheme. This scheme has been in operation since 1984 (extended to 31 December 2003 at time of writing) and, under it, qualifying companies can raise finance from qualifying investors. The investors in return receive shares in the qualifying company and tax relief in respect of the amount invested.

In recent times a number of Artists have availed of this scheme to finance the production of their albums. However, safeguards are essential, and the whole process is therefore quite lengthy and complicated, requiring professional assistance from your solicitor and accountant. In order to qualify for BES status, it is necessary to have (or form) a limited company for the purpose of producing, marketing etc. recordings by a ‘new artist’. Under the legislation, a new artist is defined as a solo artist or group whose total record sales to date are less than 5,000 units, prior to application. Among the documentation required is a three-year business plan, which must be submitted to the Minister for Art, Sport and Tourism, as well as an annual business report.

Although a certificate may be issued, it is not a guarantee that the Revenue will regard the company as a qualifying company or that relief will be granted to investors. This is a matter for the Revenue to decide. Assuming all goes well, the artist then has to sell the project to investors. This can prove difficult, as the project has to have a ‘risk factor’ and investors must be made aware of this. Qualification for BES is no guarantee of success, and remember your investors hope to get their money back with a profit after five years.

All answers supplied by O.J. Kilkenny and Co. Chartered Accountants, specialists in the entertainment and music industry. You can contact them at [email protected] or call Michael McKenna (01) 661 1588