The Upper Tax Tribunal has ruled that film partnership scheme Eclipse 35, marketed as a tax efficient way to invest in the film industry and recommended to many as a way to mitigate higher rate income tax, does not deliver the tax relief it claimed.
Eclipse 35 was a limited liability partnership which claimed to enable its 287 individuals to obtain tax relief on their general income. It is one of 31 related avoidance partnerships with over £600m tax at risk, according to HM Revenue and Customs. The scheme was first used in 2006-07.
HMRC believed Eclipse 35 did not work and secured an initial victory at the First Tier Tribunal in 2011. An appeal by Eclipse Film Partners has now also been rejected by the Upper Tribunal.
The revenue challenged the validity of this scheme arguing that the scheme was specifically structured simply to create a tax relief for the investors, rather than to further the promotion of the film.
In April 2012, HMRC won a court battle to stop Eclipse 35 from gaining tax relief after it revealed a plan to claim relief on a complicated £1bn deal with Disney.
Rebus Investment Solutions is acting on behalf of a number of “premiership and ex-premiership footballers” to target financial advisers who advised them to invest in unregulated collective investment schemes.
Rebus previously told FTAdviser that the schemes involved include Eclipse 35 and a number of film sale and leaseback schemes promoted by Ingenious Media. According to FTAdviser sister title the Financial Times, there could be as many as 12 footballers pursuing their financial advisers for around £14m in losses.
David Gauke, Exchequer secretary to the Treasury, 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.”
Last year the now defunct Financial Services Authority proposed a ban on selling such schemes to retail investors after it discovered that hundreds of schemes had made losses.
