Penalties of up to 20 times initial investment

The Eclipse Film Partnerships (“Eclipse”) originated from a modelling structure created at HSBC, and subsequently sold to Future Capital Partners Limited (formally known as Future Films Ltd) (“FCP”) and marketed as a tax efficient vehicle for investment in future returns on film rights on currently unreleased studio made films, creating a tax deferral benefit repayable in the final year of the life of the partnership.

As per the published marketing material, individuals subscribed to bespoke Limited Liability Partnerships (“partnerships”), who in turn acquired the film rights from the studio concerned (Walt Disney Pictures and Television) (“the Studio”) before sublicensing these rights back to the studio for further exploitation.

Newport Eclipse Action Group

HMRC opened protected enquiries into these partnerships, arguing that they did not believe that the partnerships were actually trading with the ‘intention of making a profit’. In April 2016 the Supreme Court ruled that the partnerships were ‘non-trade businesses’, which meant that partners were no longer eligible for tax relief and were further charged income tax on income they had never received – i.e. a ‘dry tax charge’. This effectively meant that Eclipse members were now faced with the prospect of crippling tax demands far in excess of any taxable benefit they received from their participation in these schemes. These demands, being in some cases in excess of a multiple of 20 times their original cash contribution, would leave individuals with no other alternative but to file for bankruptcy or worse.

Newport established the Eclipse Action Group (“Action Group”) to complete a full legal and technical analysis of the Eclipse structure with the aim of clarifying the extent of the underlying issues with the scheme and implementing a strategy to ensure that any negative impact to members was minimised. This review revealed that the scheme marketed to investors in fact bore little resemblance to the transaction itself, and rather than being a genuine trade was in fact simply a circular movement of money, intended to create the illusion of an investment.

Litigation and action

Newport are utilising the services of Edwin Coe LLP (“Edwin Coe”) who will be working with leading Chancery barrister Matthew Collings QC to bring the action against HSBC. Edwin Coe have specialised in class actions of this nature for more than 25 years and are a leader in the field, with the senior partner involved the current President of the Law Society. They have substantial experience and expertise in successfully litigating for large groups of individuals against banks and other well-funded organisations.

After years of dedicated due diligence and investigation, Newport and Edwin Coe are pleased to confirm proceedings have been issued and the Particulars of Claim are now complete.



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