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The taxpayer a limited liability partnership claimed a loss in respect of film production costs relating to a specific movie.
HMRC refused the claim on the basis that the taxpayer was not trading because it no longer owned the negative of the film – and even if it was trading the movie constituted trading stock of the business.
The Special Commissioner allowed the company’s appeal but it was overturned in the High Court.
The taxpayer approached to the Court of Appeal which found that the taxpayer was trading at the relevant time regardless of the fact that it no longer held the negative of the film and its trade was the exploitation of movies within F(No 2)A 1992 s 42.
Furthermore the film did not constitute trading stock. However the appeal court ruled that HMRC were right...
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