Sun Shines On Eclipse At Last
Published date | 09 September 2021 |
Subject Matter | Litigation, Mediation & Arbitration, Tax, Trials & Appeals & Compensation, Professional Negligence, Income Tax |
Law Firm | Berg Kaprow Lewis |
Author | Mr Geraint Jones |
A considerable weight will be removed from the minds of investors in the various Eclipse Film Partnerships with HMRC's announcement on 6 September of a settlement opportunity.
The Eclipse film schemes were intended to offer a deferral of tax. Very broadly, the purported effect was that the partnerships came to have a stream of (taxable) income and the members a stream of (tax-deductible) interest payments of a similar amount. The trick was in the timing: the interest relief came in the early years of the scheme, while the income arose in the later years: hence the tax deferral. (Those with a close interest in the schemes will recognise that that is an oversimplification, but it's close enough for now.)
Unfortunately, a court case in 2015 [2015] EWCA Civ 95 held that the partnerships weren't trading. That had the catastrophic effect that while the income remained taxable the interest wasn't deductible - effectively creating the infamous 'dry tax' charge. Cue panic among investors and multimillion-pound professional negligence claims.
Since then, the matter has rumbled on in a manner that makes Jarndyce v Jarndyce look like a model of expeditious litigation, including numerous references back to court and issue and withdrawal of accelerated payment notices.
So HMRC's announcement of a settlement opportunity drawing a line under the proceedings is very welcome indeed (almost as much, we suspect, to those at HMRC who have been struggling with this for years as to investors).
The terms of the settlement...
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