HMRC takes film scheme battle to Supreme Court

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HM Revenue & Customs is to launch a multi-million pound battle in the Supreme Court with a group of film scheme investors.

A hearing will open on Wednesday over a £503m deal between an investment group and Walt Disney Pictures.

Members of Eclipse 35 paid the sum to acquire the distribution rights on two Disney films, and claimed tax relief on loans taken out to the fund the purchase.

The group then immediately leased the film rights back to another member of the Disney group in exchange for repayments over 20 years.

A Court of Appeal ruling in February 2015 found the deal did not represent a trade, and therefore did not qualify for the tax relief.

The case will be the latest in a series of battles fought by HMRC over film scheme investments.

In December a ruling granted a group of 150 film scheme investors permission to appeal a High Court verdict, which also found in favour of HMRC, just weeks before a former financial adviser was jailed for six years for his role in a film scheme fraud.

And in November, reports emerged of a pair of advisers who earned more than £5m from recommending film scheme investments worth a total of £100m to some of the biggest names in British football.

Such verdicts led HMRC to write to film investment schemes in January, offering a deal to settle long-running tax disputes, and encouraging film partnerships to avoid further investigation and the cost of going to court.

According to the FT, HMRC’s crackdown has led to more than 140 claims relating to film partnerships being passed on to the Financial Services Compensation Scheme.