One businessman calculated he faced a tax bill between £5m and £7m from an original investment of £300,000.
Eclipse 35, a limited liability partnership scheme, whose investors include former Manchester United manager Alex Ferguson and ex-England coach Sven-Göran Eriksson, claimed to allow partners to get tax relief on loans used to buy the distribution rights to the Disney films Enchanted and Underdog.
HMRC dispute
The partnership has been involved in an ongoing dispute with HMRC since 2011, after the UK tax office found that Eclipse failed to actually conduct any trades, which is a prerequisite to qualifying for any tax relief.
Court records show that Eclipse paid £503m to acquire the distribution rights to the Disney films which it then immediately sold to another member of the Disney Group for a payment of £1.02bn spread over a 20-year period – an arrangement HMRC described as “a sophisticated financial model”.
HMRC won its first case against Eclipse 35 in a tribunal in 2011, which was then appealed by the film cooperative but was again rejected in the Upper Tribunal in December 2013.
Jennie Granger, director general of enforcement and compliance at HMRC, described the ruling as a “fantastic victory” for the tax authority, adding that it will have “significant ramifications” for the 31 other Eclipse schemes it is currently looking into.
She said: “It just proves that tax avoidance doesn’t pay and highlights the danger that people face in getting involved in these schemes, which can see investors in a worse position than if they had not entered the avoidance scheme in the first place.”
Appeals
In February 2015, the Court of Appeal, upheld its earlier decisions and said the scheme was created for tax avoidance reasons.
Eclipse then took the HMRC to the Supreme Court to appeal the outcome – which was squashed by the court on Wednesday and means that no further appeals can be brought.
Court out
A number of other sports stars are currently under the spotlight in relation to cases still before the courts regarding property and film ventures recommended by financial advisers.
Last December, several former England cricket captains including Michael Vaughan, Andrew Flintoff and Marcus Trescothick were among those who had invested more than £3m in film schemes promoted by the Ingenious Group and may face heavy tax bills after being challenged by HMRC.
Just a month before, England and premiership football players Rio Ferdinand, Andy Cole, Danny Murphy, Martin Keown and Robbie Savage suffered huge losses, in some cases up to £7m, after two adviser working for Kingsbridge Asset Management recommended similar tax deferral schemes.
