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Utilising film finance loophole leads to bankers’ arrest

Utilising film finance loophole leads to bankers’ arrest

HMRC recently arrested around 16 people, including some City bankers, suspected of participating in a tax evasion.

The fraud exploited a loophole in film finance schemes but the Revenue declined to divulge the details behind it.

Among those arrested were four employees from the investment banking arm of the Royal Bank of Scotland and staff from Marex Spectron, a commodities broker, and US bank Jefferies. However, the arrests were in connection with the activities of the individuals and do not reflect on their employers.

John Cassidy, a PKF tax investigations partner, said they thought the arrested men might have been over-inflating the film finance relief. For HMRC to take the trouble to raid the men’s homes and order the arrests suggests that this was a deliberate fraud. Normally the Revenue carries out very few raids as they both time consuming and labour intensive exercises. It normally finds better ways of dealing with loopholes.

HMRC has been cracking down on high earners recently to make sure they pay their fair share of taxes to reduce the fiscal deficit.

Last November, a first tier tribunal decided that two film partnerships had not been set up as commercial operations and therefore they were not allowed to claim sideways loss relief. This suggested that a popular tax avoidance strategy was being closed down.

Sir Alex Ferguson, the manager of Manchester United, is one of several high profile figures who have used film partnerships as a means of offsetting tax losses.

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Image: Reels from the Past. by Ryan Baxter Photography

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