The Upper Tier Tax tribunal has upheld the First-tier Tribunal’s decision that Eclipse Film Partners No 35 LLP (Eclipse 35) was not carrying on a trade and so a tax scheme to provide tax relief for investors failed.

Eclipse 35 was a film partnership was set up to secure income tax relief for its investors in 2006/07. It entered into a complex set of transactions with the Disney Group of Companies to licence to film rights and sub-license rights to distributor.

Under the financing arrangements, members of the LLP relied on loans from Barclays and were able to claim £117 million in loan interest; almost three times the amount that they invested. The mechanics of the scheme meant that the main risk centred on Barclays' solvency. The case made the national press because a number of celebrities invested large sums in order to obtain tax relief.

The First Tier Tribunal denied tax relief on the basis that the LLP was not carrying activities that amounted to a trade. This was confirmed by the Upper Tier Tribunal, however on a minor issue they did find that that Eclipse 35 was carrying on a business involving the exploitation of films with a view to profit.


Upper Tier Tribunal decision: Eclipse Film Partners No 35 LLP [2013] UKUT 0639 (TCC)

 First Tier Tribunal decision: Eclipse Film Partners No 35 LLP TC 01963