Investment in film distribution business is not a trade

The taxpayers participated in the Scion Structured Products Ltd scheme. Broadly the scheme involved a film studio selling the distribution rights to a film to a Scion film rights company. This would sell or license the rights to investors among whom were the taxpayers. They had invested using a combination of their own funds and borrowed money. They would be entitled to a share of the profits of the films subject to a minimum annual payment (MAP). These payments were intended to enable them to meet their loan interest obligations. The expectation was that the loss resulting from the fees and expenditure on the film rights acquisition would be available for sideways loss relief and that the interest on the loan would be deductible.

HMRC disagreed that losses arose and raised discovery assessments to assess the payments to income tax.

The taxpayers appealed.

The First-tier Tribunal considered the discovery...