UK Tax Avoidance With a Film Partnership Scheme by anamaulida


									Film partnership Schemes are a form of tax planning and have been
available and used since 1997 as a way of avoiding income tax and in some
cases Capital Gains Tax. They are particularly effective for income tax
planning. These UK tax avoidance schemes are often described as Film
Schemes or film tax avoidance schemes. The form they take is continually
changing to remain legal with new legislation. They have ranged from
simply investing in a particular film that is about to be released to
even making and producing a film.Background
To promote the use of UK Filming facilities like Pinewood Studios and
bring large expenditure to the UK or retain expenditure in the UK, the
HMRC introduces from time to time very favourable tax breaks to
individuals and companies that place cash with the production of films.
The Tax Avoidance Industry then started using these tax breaks for film
partnership schemes to great effect in avoiding income tax and sometimes
capital gains tax. This has caused legislation being introduced by the
HMRC over the years that prevented the use of film partnership schemes as
a way of avoiding tax.Film Investor Tax Breaks Massively aid the UK Film
Each time these changes in legislation have had an adverse effect on the
film industry. For example, in 2004 the number of films being created in
the UK reduced half and the revenue spent in the UK on films dropped from
GBP 269 million to GBP 117 million. This caused the re-introduction of
these very favourable tax breaks. This situation has fluctuated over the
years and has meant that film partnership schemes are not always possible
in a given tax year. There is always great pressure on the Government and
HMRC from the Film Production Companies to keep the tax breaks for
investors in the production of UK films in the UK.However, clever
accountants have numerous ways in which various tax experts have devised
tax avoidance schemes over the years and these methods are not restricted
to film partnership schemes. There are many ways of creating paper
losses, like investing in patents for new pieces of software, which could
potentially make huge gains, but often trigger large losses, which are
what is wanted for a tax avoidance scheme. However the investment must
always be commercially viable and have a credible upside. Some film
schemes historically did not even involve a real film so were naturally
deemed as unworkable by the HMRC for tax avoidance purposes.How do film
partnership schemes work? The way film partnership schemes or any tax
avoidance scheme works is to create a loss. The loss is usually created
through a geared investment that will ultimately be associated with a
high risk business opportunity where the outcome isn't certain. The
equity for the loan is usually around 20 % to 25 % and the loan is what
creates the larger exaggerated loss. The clever bit is designing the loan
to be commercial but in such a way that it will never be paid back. Film
Schemes can be used by Self Employed people as well as those who pay tax
as they earn it through an employer (PAYE). Self employed people will
submit their tax return with a zero balance of income on it and therefore
pay no tax. Those who are employed will also submit a tax return where
they usually will not be required to and claim their tax back from HMRC
because a loss will be shown against the income from their job. The
earliest that employed people will receive their refund will be
approximately 3 weeks from submission of their tax return although a
delay of several months is not uncommon.Film partnership schemes often
enable the participant to create a loss sufficiently large enough to
avoid tax in the current tax year and to claim back tax for the previous
three tax years, which is a huge bonus to ones wealth or lifestyle! This
particular aspect of tax avoidance will always be determined by each tax
break being offered in a particular tax year.

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