Tax Relief Ruling on Films
26 April 2012
HMRC has won a court battle to stop a film investment partnership called Eclipse Film Partners No 35 LLP from gaining £117m in tax relief. The partnership wanted to claim tax relief on a complicated £1bn deal with Disney.The partnership, which included wealthy football managers among its members, had taken out a large loan to acquire distribution rights to certain films and then leased them back to the same film producer.
The members of the partnership then claimed interest relief on the loans taken out to fund the purchase of the distribution rights.
However, when it came to court a First Tier Tribunal ruled that the partnership was not carrying on a trade, with the result that the members of the partnership could not claim tax relief for the interest on money borrowed to finance the acquisition of the rights.
While this is seen as a victory against “aggressive” tax avoidance, the decision is subject to appeal in higher tribunals.
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