HM Revenue & Customs has won a court victory over a film investment scheme’s proposed use of tax relief.
The Times reports on a case involving a scheme called Eclipse 35, which had 289 investors who were looking to take advantage of a collective £117m tax relief on a £1bn investment arrangement with Disney.
Investors in the scheme included Manchester United manager Sir Alex Ferguson and former England manager Sven-Goran Eriksson along with bankers, chief executives and hedge-fund managers.
The scheme was funded by a £790m loan by Barclays to Eclipse 35 with the 289 investors adding £50m of their own funds. Eclipse 35 then paid £503m to Disney for the worldwide rights to two films, Enchanted and Underdog.
Eclipse 35 paid £44m in fees to the organisers of the scheme, Future Capital Partners before paying Barclays £293m for the first ten years of interest payments on its £790m loan.
Eclipse 35 then relicensed the rights to the films back to Disney, anticipating a return of £1.022bn over 20 years before intending to claim tax relief of £117m from the Revenue for the £293m interest paid back to Barclays.
Disney was also paid £6m for its participation in the scheme.
HMRC argued the scheme was no more than a way of offering investors a large amount of tax relief rather than carrying out any trading or group business. The court was also told that all 40 Eclipse film schemes are being investigated by HMRC.
An Eclipse 35 spokesman says: “We maintain that this investment is very much a commercial opportunity. We are disappointed with the decision and intend to vigorously appeal it.”
Such vehicles have seen billions of pounds invested since 2004 and although rules around investment in them have been tightened, some schemes remain under HMRC inquiry.
The Times also reports that two of David Cameron’s key business advisers have been investors in a film production partnership that is under HMRC investigation.
Energy business Centrica chief executive Sam Laidlaw and BAE Systems chair Dick Olver both took stakes in investment vehicle Ingenious Film Partners 2 LLP.