A hot contender is a little film called Once. Made for just 200,000, it has so far grossed over 10 million . . . before its UK release.

Co-produced by the Irish Film Board and Samson films, the film proved a milestone for a new type of low-budget production ideally suited to Ireland.

A small crew wielding lightforgiving digital cameras "wrapped" a highly mobile shoot all over Dublin inside three weeks. It's a milestone Irish film, not only in showcasing musical talent but also in the way a good story was put onto the big screen on a budget that wouldn't keep an old-fashioned movie mogul supplied with Habana Montecristos.

"Director John Carney (Bachelors Walk) has been working on low-budget digital projects and he was quite comfortable with the format, " says David Collins, managing director of Samson Films.

To put this in perspective, Collins estimates that shooting on traditional 35mm film could have doubled the budget.

The success of Once "has taken us all by surprise", he says. "We pre-sold it to RTE and expected only a modest release in Ireland."

Unfortunately for Section 481 investors, Oncewas considered too small for the scheme. Collins reckons that a budget of 600,000 to 700,000 would be required to make it worthwhile.

However, his latest project, a film version of Eugene (Pure Mule) O'Brien's play Eden, has a budget of around 1.8m and has gone down the Section 481 route, which has proved a boon to both investors and the industry.

Last year 38 projects were certified under S481, with a total Irish spend of 115.6m. That was up from 28 projects in 2005, with an Irish spend of 64m.

Anglo Irish Bank is far and away the biggest player in putting these packages together. By the end of this year, it will have raised 75m, which probably makes up well over 90% of the total market. This includes Garage and the TV series The Tudors.

"Last year was the biggest yet, " says Elaine Gill, head of film finance at Anglo. "We raised 80m but that was a lot to do with The Tudors for American television at 21m."

The raunchy period romp proved a huge financial success.

But the film business is also notoriously unpredictable. From difficult stars to overspending directors, the potential for disaster is huge.

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How 'Cleopatra' almost brought down a motion picture empire CLEOPATRA is a classic example of how film budgets can balloon out of control. Originally budgeted at $2m, this 1963 production ended up costing $300m in today's money and almost bankrupted 20th Century Fox.

Problems included star Elizabeth Taylor falling ill and needing a tracheotomy (the scar can be seen in some shots), leading to long delays in production. Far from losing money as a result of her ordeal, Taylor's contract ensured that the delays triggered an increase in her fee to what would be $47m in today's money, adding further to the producer's woes.

There was no shooting script (actors sometimes ad-libbed) leading to a near-final cut that was six hours long. Director Joe Mankiewicz, who had been sacked, had to be rehired to make sense of the mess.

Despite all this, the film topped the US box office . . . but still only recouped half its cost! However, worldwide sales and TV rights eventually helped Fox recover the total cost many years later, helping to save the studio from extinction (along with its subsequent release of smash hit The Sound of Music).

Less fortunate was United Artists, which produced Michael Cimino's western epic Heaven's Gate. The film ran way over budget and ended up costing about $120m in today's money. It made just $3.5m at the box office, killing off the western for two decades and leading to the demise of United Artists, one of America's oldest studios.

Irish film disasters have been few, probably because most of our films are low-budget. One of the biggest, with a rumoured budget of 16m, was the collapse during shooting of Divine Rapture, starring Marlon Brando. However, this film was not locally financed . . . the producers were an ambitious but untested French outfit.

Teresa McGrane, head of business affairs with the Irish Film Board, says such a fiasco would be highly unlikely to happen under Section 481. She admits there are some risks but there are several safeguards, including an insurance policy called a "completion bond".

Elaine Gill of Anglo says, "you have to go back into history many years" to find a real disaster. "We work with producers with a long track record. We need to be sure that the person on the ground is someone we know and trust."

Gill stresses that returns are not guaranteed but they are ring-fenced to a considerable extent. There is an agreed return set out that will be paid back to the investors at a relatively early stage if the project is completed and taken up by distributors.

How Section 481 actually works

INVESTORS buy shares in company A, which is engaged by company B to produce part or all of a film. When the project is handed over, a pre-agreed amount of money is paid by company B to company A providing it with a small profit (after tax relief).

This money comes from pre-sales or from investment income raised by company B. Therefore, company A is virtually assured of a reasonable but unspectacular return. Company B could then lose out if the film flops at the box office . . . or make a killing if it turns out to be a big success.

Section 481 investors won't share in any major profits after they get paid but they are somewhat shielded from losses too.

On an investment of 31,750 you can reasonably hope to get back 31,750 plus another 2,000 between the return on production and tax relief. And you can at least feel good about supporting the Irish film industry and bask in the success of films such as Garage and The Wind that Shakes the Barley.

"There's such talent in this country, " says Elaine Gill. "It's phenomenal that we have had Cannes winners two years running."

That might not have been possible without Section 481 investors.

'CRITIC' AWARDS THREE STARS FOR S481 DECLAN (not his real name) was happy enough with the return he earned under Section 481 . . . although he admits it was hardly spectacular.

"Basically, you invest about 31,700 (which you can borrow). You get a return of about 6,000 less than that but tax relief amounts to 8,000 (providing a net return of 2,000), " he says.

The downside is the risk that the "lm will collapse . . . or that you don't earn enough higher-rate income for the year to get tax relief at the full rate. However, the adviser who arranges the investment should be able to assess your tax situation.

"I've invested in In America and Lassie through Anglo. I will probably do another one with Anglo this year, " says Declan.

However, he stresses that the "lm investment business isn't as glamorous as some may imagine.

"There are no perks to it apart from the satisfaction of backing a good Irish movie and the Revenue can be very slow in processing the refund too, " he adds.

So overall Section 481 rates around three stars out of "ve from this seasoned investor.