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Eclipse Film Partners v HMRC

In Eclipse Film Partners v HMRC (Upper Tribunal – 20 December 2013) the FTT ([2012] UKFTT 270) had held that Eclipse did not carry on a trade (see ‘Eclipse: trading revisited’ (Chris Bates & Judy Harrison) for an analysis of the FTT’s decision and a description of the facts).

The transaction offered investors in a film partnership substantial current year interest deductions. This deduction was only available to partners if the partnership was transparent for tax purposes. Under ITTOIA 2005 s 863 this in turn depended on whether the partnership was trading.

The tribunal found that that the FTT had been justified in finding that the prospect of Eclipse receiving anything above the pre-set income stream was too remote to be considered as an expected profit. Furthermore the tribunal agreed that Eclipse’s involvement lacked commercial substance and that ‘an adventure in the nature of a...

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