HMRC triumphs in billion pound Supreme Court case

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The UK’s tax authority has defeated the latest in a string of film partnership avoidance schemes at the Supreme Court, in a ruling that could amount to an additional one billion pounds for the UK’s tax coffers.

The Supreme Court ruled against two users of what HMRC deemed to be a failed tax avoidance film partnership scheme – De Silva and Dokelman – who the Revenue claimed tried to use legitimate investment in the film industry as a ‘hook’ for tax avoidance.

HMRC defeated the avoidance scheme, in which De Silva and Dokelman participated, in court but the pair argued on a technicality that HMRC could not overturn their loss relief claims arising out of the failed schemes.

However, the Supreme Court ruled in favour of HMRC and established the precedent that these taxpayers, and others waiting for this ruling, will now have to pay their tax.

The case dates back to 2011 and involves two taxpayers, referred to in the judgment as “R (on the application of De Silva and another)”.

A Supreme Court summary stated that investors in the scheme had “invested in and became limited partners of various partnerships in the implementation of marketed tax avoidance schemes”.

Others will have to ‘pay what they owe’

Commenting on the case Jim Harra, director general for customer strategy and tax design at HMRC, said: “This is another great success in HMRC’s drive against tax avoidance. HMRC defeated De Silva and Dokelman’s tax avoidance scheme but they still argued on a technicality that the department could not collect the tax.

“The Supreme Court’s decision in favour of HMRC on this point will ensure that these taxpayers and others waiting behind their case will have to pay what they owe.”

String of HMRC victories

The victory is the latest in a string of HMRC victories against investment schemes in the creative industries for tax purposes.

In June the ‘Ingenious’ film partnership lost the latest decision in an ongoing dispute with HMRC over an estimated £700m tax bill after a tribunal ruled losses eligible for tax relief were to be cut to 4%, while the latest ‘Icebreaker’ appeal was dismissed by the Upper Tribunal.

The UK’s tax authority has lost only three of the tax avoidance cases which went to court in 2016-17, out of a total of 26 decisions on tax avoidance between HMRC and a company or individual.

About Tom Herbert

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