Tribunal rules strongly against film scheme
A tax avoidance scheme marketed by Goldcrest Pictures Limited to some of the wealthiest people in society has failed to live up to its promise.
皇冠体育app Tax Tribunal has ruled that the scheme, which was based on buying and selling film rights, simply didn鈥檛 work.
Users not only had to pay the tax owed with no relief at all for the money they put into the scheme, but also ended up out of pocket as a result of paying fees to the company.
Goldcrest have been responsible for a string of critically and commercially successful films including Gandhi, 皇冠体育app Killing Fields, Chariots of Fire and A Room with a View.
A Goldcrest company, based in the British Virgin Islands, sold rights in two feature films for an artificially inflated figure of 拢21.9 million to Patrick Degorce 鈥� a hedge fund manager 鈥� who was, in fact, only required to pay 拢4.8 million of his own money.
He immediately sold the rights back to the same Goldcrest company for a fraction of this price 鈥� claiming that the difference was a trading 鈥榣oss鈥�. He aimed to set this 鈥榣oss鈥� against 拢18.8 million profits of his hedge fund 鈥� so he wouldn鈥檛 have to pay any tax on them.
In a comprehensive win for HMRC, the Tribunal ruled strongly against the scheme.
David Gauke, Exchequer Secretary to the Treasury said:
皇冠体育app Government has made it clear that we will not allow marketed avoidance schemes to deprive the UK of vital tax revenues. We have invested nearly 拢1 billion to help HMRC take action against the minority of taxpayers who think they are above the law, we are bringing in new anti-avoidance legislation and we are giving HMRC greater powers to clamp down on those who sell dubious avoidance schemes like this one.
皇冠体育app Tribunal鈥檚 ruling in this case sends a clear message to anyone tempted to buy into this type of scheme.
Jim Harra, HMRC Director General, Business Tax said:
This is another film scheme which has delivered none of the tax benefits promised by the promoter.
Mr Degorce put in nearly 拢5 million of his own money, including 拢1.6 million which went into the promoter鈥檚 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鈥檛 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.
This is the third in a 鈥榟at-trick鈥� of important successes at Tribunal in HMRC鈥檚 drive against tax avoidance. 皇冠体育app others were:
- the abuse for put in place to support medical research
- the , which if successful, could have made paying income tax voluntary
Patrick Degorce claimed losses in the first year of the scheme in 2006/07 of 拢18.8 million, putting tax at risk of 拢7.5 million.
Eleven other individuals used the Goldcrest scheme in its first year (they are also bound by the Tribunal decision) with total combined losses of 拢47.6 million risking 拢17.7 million of tax.