What else can I say but that I am delighted that the Eclipse 35 tax avoidance scheme was successfully blocked by HMRC. The Independent give the low down, here.
It's another step in the right direction.
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Word in the market is that it will be appealed and that the tax tribunal has almost certainly completely mis-directed itself as to the law, although as judgement has yet to be published it is difficult to know for sure. My understanding is that it focuses purely on the technical issue of whether the partnership was trading for which there is 50+ years of case law. HMRC position on this is very difficult to understand because if taken literally would mean that there were many businesses which buy goods knowing that they have a buyer lined up already to sell to which would now not qualify as a trading business.
Sadly the tax tribunal reasoning has become alarmingly bad over the last 3-4 years even when the actual result is correct. What happens is the cases end up at Court of Appeal or Supreme Court who have to then have to “correct” the case. It does neither the tax payer nor HMRC any good.
Problem is that this seems to be a simple (if very highly geared) film sale and leaseback structure. Whether morally this should ever have been allowed is an interesting question but legally they were and indeed HMRC own manuals explained to HMRC officers how they worked in a way that HMRC considered acceptable. As those manuals are publically available, provided the scheme followed the manual guidance, then tax payers should have a legitimate expectation that HMRC will follow their own rules.
Eclipse along with many such partnerships took expensive legal advice before entering into these schemes. By any accounting definition the business was trading and the judgement is entirely due to political pressure. The judges should uphold the law, not make moral judgements.
If we are to prevent tax avoidance it should be leglislated, not retrosepctively applied
Can you prove that allegation of corruption?