Tax litigation and film schemes

HMRC accepted early on that partnerships granting secured fixed rental finance leases of films so as to defer, but not avoid, tax were carrying on the trade of exploiting films and, therefore, entitled to film tax reliefs. This was followed by a proliferation of schemes to enhance the reliefs. HMRC resorted to litigation and, after early set-backs in double-dip schemes, has been successful in challenging GAAP write-down, exit, inflated valuation and prepaid interest schemes. This has encouraged HMRC to offer a settlement opportunity for certain schemes. Meanwhile, investors facing losses from failed schemes are resorting to litigation against their promoters or advisers.