Film partnership was not carrying on trading activities

The taxpayer was incorporated by the FF group and entered into transactions relating to the film Les Misérables.

The upshot was that the taxpayer claimed a trading loss on the basis that it was carrying on a trade of providing print and advertising services to Universal in return for rights to receive amounts from the movie’s profits.

HMRC refused the claim saying the taxpayer was not carrying on a trade. The taxpayer appealed.

The First-tier Tribunal found it ‘impossible’ to see the taxpayer’s activities as amounting ‘in any meaningful way’ to a supply of services in return for the rights. Instead considering the package of agreements as a whole its activities amounted to investment. These activities involved the acquisition of rights that could generate income over time. In essence all the taxpayer had to do was ‘pay and sit back and wait’.

This conclusion...