.png)
.png)
Catch a film?
The three appellants were a parent company, its subsidiary filmmaker (Peakviewing (Interactive) Ltd) and the owner and distributor of the films. Peakviewing had produced over 8,500 five-minute films since 2000, but none had been commercially shown or exploited.
Catch a film?
The three appellants were a parent company, its subsidiary filmmaker (Peakviewing (Interactive) Ltd) and the owner and distributor of the films. Peakviewing had produced over 8,500 five-minute films since 2000, but none had been commercially shown or exploited.
Under section 42, Finance (No 2) Act 1992 and section 48, Finance (No 2) Act 1997, the acquisition expenditure on qualifying British films could be claimed in full and the films were being sold to partnerships of higher-rate taxpayers on sale and leaseback arrangements.
The Secretary of State for Culture, Media and Sport refused to certify that the films were qualifying British films under Schedule 1 to the Films Act 1985, because she was concerned at the apparent high costs of making each film (over £700,000), while there were no plans to exploit them. The Secretary had to be satisfied that at least 70 per cent of the total expenditure on a film had to be incurred on film activity in the United Kingdom and not less than 70 per cent of the labour costs represented payments in respect of the labour or services of specified persons. The Inland Revenue had also advised the Minister of its concerns regarding irregularities in the companies' accounts and the tax returns of producers employed by them.
The claimants appealed against the Minister's decision.
The court held that if there was a clear and reasonable basis for concluding that the claimed costs were not the actual costs of production, the Minister could not ignore this. To do so would be inconsistent with the tax legislation and without being sure of the actual costs it was impossible to apply the criteria in the Films Act 1985. In this case there was sufficient evidence to support the Minister's concerns and the appeal was dismissed.
(Peakviewing (Interactive) Limited and others v Secretary of State for Culture, Media and Sport, Administrative Court, 23 July 2002.)
Win some, lose some
The appellant owned 100 per cent of the shares in IH, a Bermudan company. This company owned shares in C Holdings Limited (a United Kingdom company), which in turn had a 100 per cent United Kingdom trading subsidiary, C UK Limited.
From 1987, dividends were paid by C Holdings to IH, which then paid dividends of an equivalent amount to the appellant. The Revenue considered that a liability arose under the anti-avoidance provisions of section 739, Taxes Act 1988. In December 1994, the appellant's appeal before the Special Commissioner against assessments on that basis for the years ended 5 April 1988 to 1993 inclusive failed and he subsequently paid the tax liability and interest.
The Revenue went on to make assessments under section 739 for the years ended 5 April 1994 to 1996, when identical dividends had been paid, but this time the appellant was successful before the Special Commissioner in his appeal against these (see [2000] STC (SCD) 143).
The appellant then issued proceedings to:
* recover the amounts that he had paid on the earlier assessments;
* apply for judicial review of the Inland Revenue's decision not to refund those amounts.
The court found that, for an assessment to be raised under section 739, the presence of a tax avoidance purpose did not have to be proved. Instead it was for the taxpayer to prove that there was no tax avoidance purpose, which would then prevent the application of the section. In the first decision the point had not been proved by the appellant, while in the second it had. The court recognised that this might seem odd as the points at issue were the same, but the decision of one Commissioner was not binding upon another.
(Carvill v Commissioners of Inland Revenue; R (on the application of Carvill) v Commissioners of Inland Revenue, Chancery Division, 24 July 2002.)
