Film rights

A limited liability partnership claimed film production losses of £13 642 547 under F(No 2)A 1997 s 48 and a further loss of some £1 616 889 in respect of a film consultancy fee for the year 2004-05.

HMRC rejected the claims saying that the partnership was not carrying on a trade consisting of the exploitation of films as it had sold the master negative of the film to a distribution company. Furthermore as the film production expenditure had not been completed until June 2005 any possible claim would be for 2005-06 rather than 2004-05.

The partnership appealed.

The Special Commissioners said that by entering into the distribution agreement the partnership was exploiting film and had retained an interest in the film even though it had passed the master negative to the distributor. Thus it was carrying on a trade including the exploitation of...