Office of National Statistics – Tax Schemes

The Office of National Statistics (“ONS”) has quantified the expenditure on film production in the UK at £12.2bn since 2007, including that a proportion of that will have been spent on production of films that confer favourable tax treatment by qualifying as “British”. Some of the most successful examples include films from the Star Wars, James Bond and Harry Potter series.

The ONS has also identified that £2.3bn of Film Tax Relief has been granted by HMRC to investors in these films (or associated investment schemes) over the same period. ONS summarises that a tax rebate could be claimed of up to 25% of the film expenditure, and therefore estimates the expenditure on applicable films at around £9bn.

Investments in films were sometimes made using “leveraged” schemes, for example that involved both a cash investment and a loan to increase the nominal amount invested, using “sale and leaseback” arrangements – though some schemes were more complex. HMRC has challenged a number of these schemes, assisted by recent high profile successes in the Courts, leading to financial penalties for those who had invested.

At first glance, it is difficult to reconcile the apparent success of Film Tax Relief, with the successful challenges by HMRC, inferring that much depended on how investments were structured.

The concern then arises as to the suitability of advice provided to investors – about particular schemes – before investments proceeded.