Tax relief eclipsed

The taxpayer company obtained in April 2007 a 20-year licence from Disney to distribute two films. The business was financed by 289 partners who claimed tax relief under TA 1988 s 362(1)(b) on the basis the company was carrying out a trade and the loan constituted capital used wholly for the purposes of the trade.

HMRC refused the claim on the basis that the taxpayer was not carrying on a trade.

The First-tier Tribunal noted an element of risk was a characteristic of the concept of trade in that the transactions may not prove as profitable as hoped at the outset of the business.

In the instant case the profit over a 20-year period was determined at the start without reference to the success of the company’s activities. On this basis the transactions entered into by the company...