News story

Film scheme loses appeal

The Upper Tax Tribunal has ruled that Eclipse 35, marketed as a tax efficient way to invest in the film industry, does not deliver the tax relief it claimed.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government


The firm is one of 31 related avoidance partnerships with over £600 million tax at risk. The scheme was first used in 2006 to 2007.

Eclipse 35 was a Limited Liability Partnership (LLP) which claimed, through a complex series of financial transactions, to enable its 287 partners to obtain tax relief on their general income. HM Revenue and Customs (HMRC) believed Eclipse 35 did not work, and two courts, the First Tier Tribunal in 2011 and the Upper Tribunal, support that view.

Exchequer Secretary David Gauke welcomed the judgment:

The Government wants to support and encourage genuine business investment through the tax system, which is why we have tax reliefs. However, we will not stand for abuse of those reliefs and HMRC will come down hard on anyone who tries. In this case, anyone who used the scheme to try to avoid tax will have to pay tax on the income from the scheme, meaning they are worse off than if they’d never used it. The message is clear – if it looks too good to be true, it probably is.

More information on the scheme

This scheme was promoted by Future Capital Partners and first used in tax year 2006 to 2007. It used circular flows of funds to create an upfront interest payment on which investors could claim tax relief. The Upper Tribunal confirmed the First Tier Tribunal’s decision that these claims were not allowed, and that the profits generated by the scheme were still taxable.

The First Tier Tribunal’s decision is here:

The Upper Tribunal confirmed the First-tier Tribunal’s judgment. Its decision will appear here:

Published 23 December 2013