Disney investors lose £635m film tax battle

Disney investors have lost a court case over an estimated £635m in taxes following a ruling that will have repercussions for traders and celebrities.

HMRC announced that Eclipse Film Partners (No 35) LLP had claimed to, "trade in film rights but was in reality a tax avoidance scheme."

The scheme had been set up by investors to claim tax relief on trade but in reality had borrowed money that earned interest which was then filtered through the partnership.

According to Bloomberg, the group of investors had paid for the rights of Disney's 'Enchanted' and 'Underdog' which came out in 2007, but the Court of Appeal upheld a tribunal decision that those involved in Eclipse 35 were not trading, and therefore not eligible to claim tax relief.

Eclipse 35 investors had sub-leased the rights back to a, "Different Disney entity," but in reality were disguising it as a trading transaction to claim relief. Investors had borrowed money in order to inject finance into Eclipse to benefit from tax deductions against other income according to HMRC's release.

In total there were 31 Eclipse partnerships starting from the mid 2000s and further court cases are expected to recover illegal tax relief claims.