Goldcrest tax avoidance film scheme loses £44m appeal

HM Revenue and Customs (HMRC) has defeated in the UK Court of Appeal a tax avoidance film scheme promoted by Oscar-winning blockbuster producing film company Goldcrest Pictures Ltd worth nearly £44m.

HMRC said in a statement earlier today that Goldcrest Pictures, who are behind box office hits such as Twilight, Gandhi and Chariots of Fire, sold film rights to 21 wealthy investors.

The purpose of the scheme was to create artificial losses from the sale of film rights so scheme users could considerably reduce their tax bills. HMRC said.

HMRC win

The win came after the scheme, used by Patrick Degorce, a hedge fund manager, who was defeated at the Court of Appeal.

Penny Ciniewicz, pictured left, director general of HMRC’s Customer Compliance Group, said: “The majority of people play by the rules and pay their fair share of tax. We will not allow a small minority of tax avoiders to get away with not paying their fair share, which deprives vital public services of the funding they need.

“The public can be assured that we will continue to take on and defeat tax avoidance wherever we find it.”

HMRC stated that Degorce paid the inflated price of £22m for the rights of two Paramount Picture films, Tropic Thunder and The Love Guru, although he only paid £4.8m of his own money, with the rest provided in the form of a loan through Paramount Pictures.

He then sold the rights back to Goldcrest Pictures on the same day for a fraction of the price, the court heard.

Offset losses

By claiming the difference as a trading loss, he was able to off-set the manufactured £19m loss against his hedge fund income in an attempt to pay zero tax in his 2006-07 tax return.

Degorce was introduced to the Goldcrest scheme by HSBC Private Bank, who were paid a finders-fee of £438,000 and £22m was paid for the film rights which included £1.6m for advisory services, HMRC added.

HMRC successfully argued that this did not amount to trading, and protected £7.5m of taxpayer money in this case, and £36.1m  in related cases.

Since the Goldcrest scheme was implemented, anti-avoidance legislation has been enacted to prevent the use of similar schemes in the future.

Click here to view the Court of Appeal decision, and the First-tier Tribunal decision and the Upper Tribunal decision.

Gary Robinson
Head of Video and Ezines at Open Door Media Publishing. Deputy Editor, International Investment. An experienced journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as a fully qualified IFA, Gary works across both International Investment and InvestmentEurope titles. Previous video production credits include projects on BBC, C4 and SKY.

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