The Queen and Oliver Twist movie backers forced to pay back £26m to the taxman in landmark ruling

Oliver Gill
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Miramax Premiere Of 'The Queen' - Arrivals
Helen Mirren starred in The Queen, one of the films backed by the partnerships involved in today's case (Source: Getty)

The taxman today hailed its victory in a tax avoidance case against partnerships that backed a number of high profile films including The Queen and Oliver Twist.

The £26m ruling paves the way for HM Revenue & Customs (HMRC) to go after similar schemes, a decision it estimates could swell its coffers by £286m.

British movie makers have been afforded tax breaks through creative sector tax relief legislation introduced several years ago to help promote the sector in the UK.

Read more: Film Tax Relief reached £251m this year

However, HMRC has cracked down on the misuse of the tax breaks, in particular individuals and partnerships using them to manage money in a tax efficient manner.

Today's decision dismissed the appeals of Proteus Film Partnership and Samarkand Film Partnership. It upheld a previous finding that they were not trading entities and therefore no tax relief was due.

Jennie Granger one of HMRC's chief compliance gurus said the schemes had "deliberately sought to exploit the tax reliefs".

But it didn’t pay off. We’re delighted with the win which means we’ve protected £26m of taxpayers’ money.

The verdict has raised the hopes of success by HMRC in similar cases.

The news comes weeks after an influential select committee criticised the approach taken by HMRC in getting money back from those who had taken film tax breaks when they shouldn't have.

Read more: Taxman rejects Tyrie claims of tough tax avoidance tactics

Treasury select committee chair Andrew Tyrie wrote to HMRC, saying its methods had caused people "very severe financial distress".

He said: "An increasing number of representations have been made to me expressing concern that the outcomes are not always fair nor what anyone could have expected. This has resulted in financial calamity for some of those involved."

HMRC rejected suggestions of heavy-handedness. A spokesperson said: “We have worked hard to tackle abuse in the system on behalf of the vast majority of investors who play by the rules, ensuring they are enforced fairly, and with sensitivity.”

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