Entitlement to income continues despite assignment

The taxpayer invested in film distribution rights using a combination of his own funds and loans. He and other investors were entitled to a share in the profits of the films but this was subject to a minimum annual payment (MAP) which was intended to enable them to meet their loan interest obligations. The aim of the arrangement was to generate a tax loss eligible for sideways relief and for the interest to be tax deductible.

HMRC denied the taxpayer’s claim for sideways relief and issued discovery assessments to collect income tax on the MAPs and disallowing the deductions for loan interest payments.

The First-tier Tribunal and Upper Tribunal dismissed the taxpayer’s appeal.

The sole issue before the Court of Appeal was whether the taxpayer was ‘entitled to’ the MAPs and whether they represented income ‘from’ the non-trade business of exploiting films so that he was liable for income tax on...