Disney Film Investors Lose U.K. Fight Over $973 Million in TaxesKit Chellel
Investors in a venture that bought the distribution rights to two Walt Disney Co. movies lost the latest round of a U.K. court battle over whether they should get tax relief on the deal.
London appeal judges ruled in favor of the British tax collection agency in the case of Eclipse Film Partners No 35 LLP, saying the partnership didn’t trade as a genuine business.
“Eclipse claimed to trade in film rights but was in reality a tax-avoidance scheme,” Her Majesty’s Revenue & Customs said in a statement. The case will ensure that about 635 million pounds ($973 million) in tax can be collected from Eclipse’s investors, HMRC said.
Senior bankers, traders and sporting celebrities were among the 289 investors in Eclipse 35 when it was created in 2006 by Future Capital Partners Ltd. The British government has targeted dozens of partnerships that it says allowed investors to improperly benefit from tax reliefs intended to boost the film industry.
Helen Buchanan, a lawyer for the Eclipse investors, didn’t immediately respond to an e-mail seeking comment. “The tax affairs of partnerships administered by FCP are confidential and we have no authority to discuss them,” Future Capital Partners said in an e-mailed statement.
Eclipse 35 bought the rights to Disney’s “Underdog” and “Enchanted,” both released in 2007, then paid Disney to distribute them, according to the appeals court ruling. Lawyers for the Eclipse investors argued it was a genuine business that negotiated with Disney and took part in the exploitation of the films.
Other Eclipse partnerships created by Future Capital made similar deals to distribute two of Disney’s Pirates of the Caribbean films, starring Johnny Depp as Captain Jack Sparrow, as well as “National Treasure: Book of Secrets,” starring Nicolas Cage, according to London court rulings.
The ruling in the favor of U.K. tax authority means there will be “very serious fiscal consequences for the members of Eclipse 35,” Judge Terence Etherton said in the written decision Tuesday.
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