Jurisdiction(s):
United Kingdom

FTT: Film LLPs not trading; Chapter 5 ITA 2007 inapplicable; sale of capital accounts generates no income tax or CGT charge (Hoyle v HMRC)

Published on: 09 December 2024

Published by a LexisNexis Tax expert

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Article summary

Hoyle and others v HMRC [2024] UKFTT 1060 (TC)

The LLPs were established as part of a scheme to purchase film rights from a studio and then lease them for 15 years to a lessee—typically a studio SPV. Around 80% of the members’ capital was financed through borrowings from the Bank of Ireland (BOI). To secure the lease rentals payable over the 15-year term, the studio placed deposits with ABN Amro at sums at least equal to the loans; these deposits were later taken over by BOI. On the basis that they conducted a trade of exploiting film rights, the LLPs claimed film tax credits. The LLPs then allocated the ensuing trading loss to the appellants, who claimed sideways relief for their respective shares under sections 380 and 381 of the Income and Corporation Taxes Act 1988, in order to shelter other income. While the tax credit produced a significant tax saving up front for the appellants, that advantage was designed to be recouped over the balance of the 15-year lease rental period...

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