A TAX SCHEME based on buying and selling film rights has been shut down in a first-tier tax tribunal ruling, seeing investors forced to pay tax owed, lose out on reliefs on their investments, while also ending up out of pocket after fees to the scheme provider.
Goldcrest Pictures, which has been responsible for a string of critically and commercially successful films including Gandhi, The Killing Fields, Chariots of Fire and A Room with a View marketed the scheme. Most recently, Goldcrest won a BAFTA for its sound mixing work on musical blockbuster Les Misérables.
A subsidiary of Goldcrest based in the British Virgin Islands sold rights in two feature films – Tropic Thunder and The Love Guru – for an artificially inflated figure of £21.9m to Patrick Degorce – a hedge fund manager – who was, in fact, only required to pay £4.8m of his own money. He immediately sold the rights back to the same Goldcrest company for a fraction of this price – claiming that the difference was a trading loss. He aimed to set that loss against £18.8m profits of his hedge fund so he wouldn’t have to pay any tax on them.
In all, £7.5m in tax was put at risk by Degorce, while 11 other individuals used the Goldcrest scheme and are also bound by the tribunal decision. In total, combined losses hit £47.6m and risked £17.7m of tax.
The tribunal ruled the scheme simply did not work, seeing investors miss out on tax savings and reliefs, while still having to pay investment fees.
HMRC’s director-general for business tax Jim Harra (pictured) said: “This is another film scheme which has delivered none of the tax benefits promised by the promoter.
“Mr Degorce put in nearly £5m of his own money, including £1.6m which went into the promoter’s pocket, but all he has come away with is an HMRC enquiry and an appearance before a tax tribunal.
“Sadly, many people have been tempted by similar schemes which we also believe don’t work, and we have opened a settlement opportunity to get them back on the straight and narrow. I would urge anyone in this position to sign up for this facility quickly.”
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