Pearse Doherty (Donegal, Sinn Fein)
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303. To ask the Minister for Finance the number of section 481 tax-relief claims that have been rejected on application stage in each of the years 2016 to 2020; the number of section 481 tax-relief claims that have been subsequently recovered with interest following inspection of the post-production compliance report; the total value of recovered claims in each of the years 2016 to 2020; and if he will make a statement on the matter. [52012/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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In the period of time covered by the Deputy’s question, two different certification mechanisms applied. It is necessary to summarise the two certification mechanisms to provide a comprehensive reply.

Prior to Finance Act 2018 a producer company would apply to Revenue for a certificate confirming that the production met the conditions set out for the scheme. The certificate was issued by Revenue, but both Revenue and the then Minister for Culture, Heritage and the Gaeltacht had specific responsibilities in relation to the certification process. The Minister for Culture, Heritage and the Gaeltacht had regard for:

- The categories of film eligible for certification and;

- The contribution a film would make to either or both the development of the film industry in the State and the promotion and expression of Irish culture.

Revenue had responsibility for all other aspects of the project, including the financial aspects. Revenue did not issue a certificate unless they had received an authorisation from the Minister for Culture, Heritage and the Gaeltacht that they were satisfied with the other aspects of the application. Therefore pre-Finance Act 2018, an application may have failed to be certified by Revenue or by the Department of Culture, Heritage and the Gaeltacht.

As part of this old claiming mechanism, Revenue examined applications based on budgeted expenditure to certify the value of the initial 90% that could be claimed up-front. Upon completion of the film and receipt of the compliance report, Revenue conducted another full examination of the actual expenditure incurred before certifying the balancing 10% of the claim. This process meant that Revenue adjusted the value of the claim where it was incorrect. In this manner Revenue verified that the amount claimed was correct. Therefore there was no incorrect amount claimed to which interest and penalties could apply. I am advised by Revenue that from January 2016 to March 2019, 320 films applied to Revenue for certification and, of these, 19 did not continue to certification.

From January 2018 Revenue began tracking the level of ineligible expenditure which was included in the initial claim, but was excluded from the final claim following the examination by Revenue. By the end of May 2019, 75 compliance reports had been reviewed with combined gross eligible expenditure of €218 million, of which €2 million was deemed ineligible. This reduced the related film relief by €0.6 million. Information concerning applications to the Department of Culture, Heritage and the Gaeltacht in this period is outlined in the table at the end of this reply.

Finance Act 2018 split the certification process between Revenue and the now Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media (DTCAGSM). Production companies now claim the tax credit under the self-assessment system. This brings the credit within the normal penalty and prosecution provisions for incorrect claims.

Production companies must first apply to the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media for a cultural certificate. In order to be certified the production must pass ‘the Industry Development test’ and ‘the Culture test’. The requirements to pass these tests are clearly set out in DTCAGSM guidance. Therefore applicants are aware of the criteria which must be adhered to from the outset.

DTCAGSM perform an in-depth examination of each of the documents which are submitted as part of the application. Applications are assessed by one member of staff in DTCAGSM, reviewed by another member of the Department, and are finally approved at the Principal Officer grade.

If, at the stage of application for certification, an application does not meet the requirements of the relief, DTCAGSM engage with the production companies to advise as to why the application may have not met the standard required. This engagement can often lead to adjustments in the application.

For projects with eligible expenditure in excess of €2 million, Screen Ireland engage thoroughly with applicants to ensure they adhere to requirements concerning skills development and training. Any issues are identified and corrected to ensure adherence with the requirements of the relief. Within 6 months of completion of the project, applicants are required to submit a Quality Assurance Compliance Report to Screen Ireland. Evidence of compliance with all conditions is required, including evidence of skills development activity. The quantity of training and the budget expended in this regard should not be less than that which was proposed at application stage.

In consideration of the importance of Section 481 funding to productions, and the significant conditions attached to the relief, applicants aim to fully comply with these requirements from the outset. As production companies become familiar with the requirements of the relief, the quality of application improves. These factors reduce the number of applications which are rejected outright.

As stated above, prior to Finance Act 2018 an application had to be approved by both Revenue and DTCAGSM to be eligible for relief. The table below concerns applications to DTCAGSM only, it does not include those which were not certified by Revenue as part of the old certification mechanism.