Two film partnerships recently came unstuck at a joint hearing, where the first tier tribunal decided that they were not undertaken on a commercial basis, so the partners were not entitled to sideways loss relief.
The case in question revolved around appeals by Samarkand Film Partnership No 3 and Proteus Film Partnership No 1 against HMRC’s treatment of their claimed losses. Both partnerships used the services of Future Film Capital Partners Ltd and bought or leased negatives of films including ‘The Queen’ and ‘Oliver Twist’.
In an enlightening, but complex write-up in its tax update this week, Smith & Williamson explained that while the accounting results of the film projects showed an accounting profit, the tribunal considered the net present value of the arrangements to be insufficient to demonstrate a commercial activity was undertaken.
We’re working on a more detailed explanation, but thought that AccountingWEB members might be able to help with our analysis. First - does anyone still get involved with film partnership schemes?
My impression was that the sheen has been wearing off this area and that where the provisions haven’t been tightened up, HMRC has been energetically launching investigations into film partnership loss claims. I’m still looking for the relevant legislation and guidance, if anyone is able to help.