Yet another film scheme fails to obtain loss relief. The Upper Tier Tribunal (UTT) has, in Patrick Degorce v HMRC [2015] UKUT 0447, upheld the decision by the First Tier Tribunal (FTT) that an loss incurred on a film investment by the taxpayer was not allowable to relieve general income, because there was no underlying trade.


  • Mr Degorce was an investor in a film scheme reportable under DOTAS.
  • The scheme involved purchasing film rights at an inflated price, and then immediately selling them back at a loss. In Mr Degorce’s case in excess of £20 million which he claimed against his general income as “sideways” loss relief, on the basis that his involvement amounted to a sole trade.
  • He had taken independent advice regarding the potential commercial success of the films in question, particularly after the underlying films were changed prior to the investment date.
  • HMRC refused to allow the loss claim on the basis that the activities of the taxpayer did not amount to a trade.

FTT findings

  • The FTT applied the ‘badges of trade’ criteria to decide if the taxpayer was trading. It found that the transaction was a one-off with no element of repetition. It bore no relation to the taxpayer’s business as a hedge fund manager.
  • The Judge ruled that the only reason Mr Degorce had entered into the transaction was to secure a tax advantage.

UTT hearing and decision

The UTT clarified that it did not have jurisdiction to overturn the FTT on findings of fact (other than in exceptional circumstances), and so it could only consider whether it had erred in law.

The taxpayer argued that the FTT had made some findings of fact which were irrational, in that they were contrary to or unsupported by the evidence; that in some respects they had not made the necessary relevant findings at all; and that they had failed to explain their conclusions.

The UTT accepted some of these criticisms, but upheld the FTT decision nonetheless. The initial FTT appeal included the statement  by the Judge that it had been “clear before Mr Degorce entered into the first of the transactions that, at the end of them, minutes later, he would be left only with the income stream. No other outcome was possible”. This was accepted as a finding of fact by the UTT.


Another sideways loss scheme that apparently fell at the first hurdle: there had to be evidence of a commercially viable trade when the taxpayer invested.