With the government loudly committed to getting rid of ‘morally repugnant’ tax avoidance schemes, it is worth looking at film partnerships which have been the target for a lot of the righteous indignation which has been flying around. Film partnership schemes were legitimately started in 1997 when the then Chancellor, Gordon Brown, established a policy to try and help the British film industry by offering tax breaks to investors. The aim was for film makers or those with a genuine interest in the industry to invest. They involved sale and lease back deals on the distribution rights of films which had already been made or were about to be made. The main tax break for the schemes was “Section 42 relief” which allowed the cost of producing British films which generated a loss to be offset against other income for 3 years. “Section 48 relief” was more generous and allowed the loss to arise entirely on the first year of the partnership. Schemes that genuinely used these reliefs were seen as meeting the spirit of the legislation.

Film Partnerships

Human nature being such as it is however, schemes soon started appearing which stretched the limits of the legislation and tested its boundaries. For example ‘double dipping ‘ or claiming twice for the same expense, a practise which was not technically illegal but which HMRC considered went against the spirit of the legislation. As a result the rules were tightened in 2005. It is now the case that investors in schemes which were set up purely to use the Section 42 and 48 reliefs should have little to worry about. Those invested in schemes which have tried to be too clever, could be in for a torrid time.


The above is the lead article in our monthly News Notes. Please click here for information regarding these notes.