EWCA Civ 261 (2010) HMRC v Halcyon Films LLP

Film scheme losses - Taxpayer won

Case Summary:

Halcyon Films LLP acquires feature films from film distributors and leases them back. In its tax return for the year to 5 April 2004 it claimed a loss of £14m. Most of that was under section 42 of the Finance (No. 2) Act 1992 (now repealed) representing relief on Halcyon’s expenditure in the tax year on the acquisition of three films.

Section 101 FA 2002 was designed to counteract “double-dipping” or “multi-dipping; that being selling the same film twice or more to allow multiple claims to relief for expenditure on the acquisition of a film. It was agreed that section 101 prevented Halcyon making a claim to 100 per cent first year relief under section 48. Halcyon maintained that section 101 did not prevent it claiming deductions over three years under section 42 instead. HMRC’s case was that the effect of section 101 was to bar all claims to acquisition expenditure relief under section 42 in respect of a taxpayer such as Halcyon, which was neither the producer of a small film nor a purchaser from the producer.

The Court preferred Halcyon’s view that if s101 removed 100% relief it was still possible to get the standard relief under s42.