Eclipse film tax avoidance scheme takes appeal to Supreme Court

FILM INVESTMENT scheme Eclipse 35 has taken its long-running battle with HMRC to the Supreme Court, four years after its contrived tax relief scheme was first brought to light.

Eclipse is arguing that the partnership constitutes as an investment, rather than an ‘aggressive’ avoidance scheme which HMRC first claimed back in 2012.

Tax reliefs

The partnership involved ex-Manchester United boss Sir Alex Ferguson, former England and former Leicester City manager Sven-Göran Eriksson and 287 others, as it looked to claim tax relief on a £1bn film deal with Disney.

The partnership borrowed £790m from Barclays and its members before contributing £50m of the partnership’s funds; about £173,000 individually.

Just over £500m of that cash was then paid to Disney as investments in the films Enchanted and Underdog.

In 2012, HMRC won a court case to prevent the investment partnership from claiming £117m in tax reliefs.

Had the deal been successful, the 289 investors in the scheme would have received approximately £400,000 in reliefs.

Lasting effect

Last year the scheme was shut down by the Court of Appeal, with Lord Justice Vos ruling that the scheme was not commercially trading with a view to making a profit. The ruling forced investors into paying legal bills which were “greatly in excess” of their investment.

It is believed the implications of the case could be far-reaching for other film investment schemes as well as others designed to achieve large tax reliefs.

Earlier this year it was revealed that bailed-out bank RBS gained over £1bn in tax breaks from investments it made in the UK film industry, with company filings revealing that the bank owns the rights to multiple Hollywood blockbusters, including Batman Begins, Troy and two films in the Harry Potter series.

Judges Lord Neuberger, Lord Mance, Lord Sumption, Lord Toulson and Lord Hodge will preside over the hearing, which is expected to conclude on today (14 April).

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