“Inherently risky”

Generally Accepted Accounting Principles (“GAAP”) investments concern Imagine No.1 LLP, Imagine No.2 LLP, Imagine No.3 LLP (collectively “Imagine”), Timeless Releasing LLP (“Timeless”) and Timeless Releasing 2005 LLP (“Timeless 2005”).

These opportunities were promoted and operated by Future Capital Partners (“FCP”), previously known as Future Film Partners. FCP were prolific in this space and devised numerous tax incentivised investment opportunities since the year 2000, ranging from plain vanilla sale and leaseback schemes, to much more aggressive offerings across a variety of sectors, including film, television and clean energy.

The credibility of most FCP schemes was later called into question by HMRC and FCP quickly lost some very public cases against HMRC, who successfully challenged the trading status of many of their partnerships.

The most prominent case in recent years was Eclipse Film Partners (“Eclipse”), where a number of high profile celebrities lost many millions of pounds.

Contingent on successful exploitation of films … which was minimal

The generic term for this type of structure was a “GAAP Partnership”, an evolution of the government backed s42 and s48 Film schemes that were used to promote investment in qualifying UK films by offering attractive up-front tax benefits through sale and leaseback arrangements.

Investment in film is inherently risky and a form of downside protection is always required in order to attract investment. GAAP structures appeared to achieve this protection by using tax losses generated in the first year of trading and setting them against members’ income via sideways loss relief. The partnership applied generally accepted accounting principles (or GAAP) to write down year one partnership expenditure in order to generate the desired loss relief.

Partnership revenue was contingent on the successful exploitation of the film, which in most instances was minimal. Although the popularity of the film played its role, the lack of income was mainly attributable to the income sharing arrangements between the studio and the partnership. This meant that the sole return was derived by the initial tax benefit. HMRC soon took an interest in GAAP partnerships and implemented measures to put a halt to their promotion and they have subsequently been classified as “Tax Avoidance Schemes”.

Group claim potential

We are currently seeking redress on behalf of the members of these GAAP partnerships. Third party litigation funding has been secured and a legal team appointed. A steering committee made up of fellow GAAP investors has been established to guide and make decisions on behalf of the wider action group.

Based on initial high level calculations, a potential claim could be in the region of £130million. We have already engaged with 250 of a total of 600 possible claimants and the group claim is growing daily. If you invested in any of these schemes and would like to discuss your options, please contact us on clientservices@newporttm.co.uk. You must have signed up to our Action Group to benefit from the claim.

 

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