THE ECLIPSE 35 FILM PARTNERSHIP has been shut down in the upper-tier tax tribunal after it was ruled it does not deliver the tax relief it claimed.
The firm is one of 31 related avoidance partnerships with over £600m tax at risk. The scheme was first used in 2006/07 and counted former Manchester United boss Sir Alex Ferguson and former England and Leicester City manager Sven-Göran Eriksson among its 287 partners.
The partnership borrowed £790m from Barclays, and its members then topped it off with £50m of their own; about £173,000 individually. Just over £500m of that cash was then paid to Disney as investments in the films Enchanted and Underdog.
Some £293m was then paid back to Barclays for a decade's worth of interest payments on its original loan, licensing the rights to the films back to Disney.
Had the deal been successful, the investors in the scheme would have each been in line for approximately £400,000 in tax reliefs on their £173,000 investment.
Exchequer secretary David Gauke said: "The government wants to support and encourage genuine business investment through the tax system, which is why we have tax reliefs. However, we will not stand for abuse of those reliefs and HMRC will come down hard on anyone who tries. In this case, anyone who used the scheme to try to avoid tax will have to pay tax on the income from the scheme, meaning they are worse off than if they'd never used it. The message is clear - if it looks too good to be true, it probably is."
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