The tax avoidance scheme, Eclipse 35, involved a limited liability partnership which claimed, through a complex series of financial transactions, to enable its 287 partners to obtain tax relief on their general income.
Essentially, the scheme – which was promoted by Future Capital Partners as a tax efficient way to invest in the film industry – used circular flows of funds to create an upfront interest payment on which investors were able to claim tax relief.
HMRC refused the claims, gaining the backing of both the First Tier Tribunal and the Upper Tier Tribunal.
HMRC has now revealed that there are another 30 related tax avoidance partnerships with more than £600m tax at stake.
Welcoming the tribunal’s decision, Treasury exchequer secretary David Gauke said, “The government wants to support and encourage genuine business investment through the tax system, which is why we have tax reliefs.
“However, we will not stand for abuse of those reliefs and HMRC will come down hard on anyone who tries.”
He pointed out that anyone using Eclipse 35 will now have to pay tax on the income from the scheme – in other words, they are worse off than they would have been if they hadn’t invested in it. “The message is clear,” he warned.
“If it looks too good to be true, it probably is.”