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HMRC wins Eclipse 35 appeal

20th Feb 2015
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The Court of Appeal has ruled in favour of HMRC against Eclipse Film Partners (No 35) LLP which it said protected an estimated £635m in tax.

Although Eclipse 35 claimed to trade in film rights, the court ruled that it was in fact a tax avoidance scheme.

HMRC said the scheme operated by acquiring the rights to Disney films and then sub-leasing them back to a different Disney entity for a guaranteed income stream.

It sought to generate large interest relief claims for Eclipse partnership investors.

The case, Eclipse Film Partners No 35 LLP v HMRC, reaffirmed that Eclipse 35  was never likely to generate “contingent receipts” and therefore was not commercially trading with a view to making a profit.

Almost 300 investors, including Sir Alex Ferguson and Sven-Göran Eriksson, poured money into the scheme. If it had worked, members could have enjoyed an average of more than £400,000 in tax relief on a personal investment of £173,000.

The court upheld earlier tribunal decisions that Eclipse 35 was not trading and as a result investors were not eligible for interest relief and profits from the partnerships were taxable.

Investor capital was supposed to be used by the partnership for trade, so individuals could make interest relief claims against their other income. However the borrowed money earned interest, which was then filtered through the partnerships to investors to cover the interest on their loans.

This was claimed as a trading transaction in order to enable the partners to claim tax reliefs.

David Gauke, financial secretary to the Treasury, said: “The government is committed to tackling tax avoidance schemes like Eclipse. These schemes, which were all too common in the mid-2000s, are an affront to the vast majority of businesses and people who pay what they owe.

“The government has invested £1bn into HMRC to track down and challenge tax dodgers and it will continue to pursue the minority who do not play by the rules.”

Eclipse 35 is one of 31 Eclipse partnerships and is the first scheme to be taken to litigation.

Eclipse 35 - the story so far

Replies (6)

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By hiu612
23rd Feb 2015 12:19

1 of 31

I wonder where the missing numbers are (Eclipse 35 is one of 31 Eclipse partnerships). The superstitious may have shunned 13?

Thanks (1)
Replying to Tax Dragon:
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By rbw
23rd Feb 2015 12:40

I don't know but I know a bloke who does....

...who goes by the name of Companies House. And there was a #13 :)

 

OC316489, ECLIPSE FILM PARTNERS NO. 8 LLP,

OC316486, ECLIPSE FILM PARTNERS NO. 5 LLP,

OC316520, ECLIPSE FILM PARTNERS NO.4 LLP,

OC322849, ECLIPSE FILM PARTNERS NO.40 LLP,

OC316490, ECLIPSE FILM PARTNERS NO. 9 LLP,

OC316518, ECLIPSE FILM PARTNERS NO.1 LLP,

OC316625, D, ECLIPSE FILM PARTNERS NO. 18 LLP, Dissolved

OC316506, D, ECLIPSE FILM PARTNERS NO. 15 LLP, Dissolved

OC316505, D, ECLIPSE FILM PARTNERS NO. 14 LLP, Dissolved

OC316626, D, ECLIPSE FILM PARTNERS NO. 19 LLP, Dissolved

OC316501, ECLIPSE FILM PARTNERS NO. 10 LLP,

OC316502, ECLIPSE FILM PARTNERS NO. 11 LLP,

OC316624, ECLIPSE FILM PARTNERS NO. 17 LLP,

OC316623, ECLIPSE FILM PARTNERS NO. 16 LLP,

OC316504, D, ECLIPSE FILM PARTNERS NO. 13 LLP, Dissolved

OC316503, ECLIPSE FILM PARTNERS NO. 12 LLP,

OC316488, ECLIPSE FILM PARTNERS NO. 7 LLP,

OC316487, ECLIPSE FILM PARTNERS NO. 6 LLP,

OC316485, ECLIPSE FILM PARTNERS NO. 3 LLP,

OC322847, ECLIPSE FILM PARTNERS NO.38 LLP,

OC322843, ECLIPSE FILM PARTNERS NO.35 LLP,

OC322842, ECLIPSE FILM PARTNERS NO.34 LLP,

OC322848, ECLIPSE FILM PARTNERS NO.39 LLP,

OC316637, D, ECLIPSE FILM PARTNERS NO. 30 LLP, Dissolved

OC322839, ECLIPSE FILM PARTNERS NO.31 LLP,

OC322846, ECLIPSE FILM PARTNERS NO.37 LLP,

OC322845, ECLIPSE FILM PARTNERS NO.36 LLP,

OC322841, ECLIPSE FILM PARTNERS NO.33 LLP,

OC322840, ECLIPSE FILM PARTNERS NO.32 LLP,

OC316519, ECLIPSE FILM PARTNERS NO.2 LLP,

OC316635, D, ECLIPSE FILM PARTNERS NO. 28 LLP, Dissolved

OC316632, ECLIPSE FILM PARTNERS NO. 25 LLP,

OC316631, ECLIPSE FILM PARTNERS NO. 24 LLP,

OC316636, D, ECLIPSE FILM PARTNERS NO. 29 LLP, Dissolved

OC316627, ECLIPSE FILM PARTNERS NO. 20 LLP,

OC316628, ECLIPSE FILM PARTNERS NO. 21 LLP,

OC316634, D, ECLIPSE FILM PARTNERS NO. 27 LLP, Dissolved

OC316633, ECLIPSE FILM PARTNERS NO. 26 LLP,

OC316630, ECLIPSE FILM PARTNERS NO. 23 LLP,

OC316629, ECLIPSE FILM PARTNERS NO. 22 LLP, 

Thanks (0)
Replying to SA2016:
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By AndrewV12
24th Feb 2015 09:45

Bloody good effort.

Great effort, bit of lateral thinking.

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By AndrewV12
23rd Feb 2015 12:52

Bogus tax avoidance schemes

My god HMRC have won a string of court cases against bogus / aggressive tax avoidance schemes.

 

Such schemes should have been laughed  out of court they are so transparent.  However as HMRC are useless such schemes have got away with murder... up to now.

At last HMRC have got their act together, about time.   Mind you it probably has more to do with the country being skint.

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By ds
23rd Feb 2015 14:31

Tip of the Iceburg

Yes not before time and maybe they will recoup the one billion pounds the government have said they have "invested" in this action. Still there's still the big American boys to go after, such as Amazon and Starbucks and many others who have used Luxembourg as an off-shore tax heaven. I won't be holding my breath about this revenue stream being diverted this side of the election, if ever.

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By nick farrow
23rd Feb 2015 15:56

is that a pun?


re the Icebreaker tax schemes

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