No artful dodge for film scheme

HM Revenue & Customs (HMRC) has won a tax avoidance case against film partnership schemes that acquired interests in films that included The Queen and the Roman Polanski remake of Oliver Twist, protecting more than £26m of taxpayers’ money.

The Court of Appeal dismissed appeals from Proteus Film Partnership and Samarkand Film Partnership, upholding a previous judgment that they were not trading andno tax relief was due.

The film partnership schemes were marketed to wealthy people, many of whom were resident but not domiciled in the UK. The arrangements sought to allow scheme users to get an upfront repayment on the tax reliefs and escape tax on the income generated.

The court confirmed HMRC’s view that the partnerships were not trading and there were never any losses available to investors to reduce their tax bills. The decision could potentially impact on other cases worth £286 million.

Director General, Customer Compliance, Jennie Granger said:

“This scheme deliberately sought to exploit the tax reliefs put in place to help boost the British film industry, but it didn’t pay off. We’re delighted with the win which means we’ve protected £26m of taxpayers’ money.”

HMRC has an excellent record of wins in avoidance cases, winning around 80% of cases taken to court, with many more settling before reaching that stage.

Notes to editors:

1.The First-tier Tribunal’s main finding had been that the Proteus and Samarkand partnerships were not trading. That finding was upheld by the Upper Tribunal which also dismissed the partnerships’ judicial review claims, brought on the basis of an alleged breach of a legitimate expectation said to arise from the terms of HMRC’S business income manual.

2.Read the Court of Appeal judgment here:

3.The Court of Appeal has now dismissed the tax and judicial review appeals. It has refused the appellants permission to appeal to the Supreme Court. If they wish to seek permission from that Court, they must file their application by 24 March 2017.

4.Anybody who anticipates problems meeting their tax obligations should contact HMRC, who may be able to offer extra time to pay where appropriate.

5.HMRC’s Flickr channel: www.flickr.com/hmrcgovuk

6.Follow HMRC on Twitter @HMRCgovuk