Alchemist (Devil’s Gate) Film Partnership v HMRC

In Alchemist (Devil’s Gate) Film Partnership v HMRC (TC02573 – 15 March) a partnership was formed in 2001 to produce a film. In its first accounting period ending on 5 April 2002 it claimed to have made a loss of £1.9m. Its return claimed significant deductions for ‘deferred amounts’ payable to members of the cast and production crew. HMRC began an enquiry and formed the opinion that these amounts were not properly deductible in the period ending 5 April 2002. They issued an amendment disallowing these amounts and reducing the loss to £597k. The partnership appealed. The First-tier Tribunal reviewed the evidence in detail and dismissed the appeal. Sir Stephen Oliver observed that ‘expenditure incurred on the production of a film is deductible as soon as there is an unconditional obligation to pay it’. In the present case the financial statement...