Film partnership leasing avoidance
As announced on 13 November 2008, the Government has outlined details of
the action taken to counter avoidance of taxation by film leasing
partnerships.
Under standard arrangements, films are acquired or produced and leased over
a period of up to 15 years to a company which would commercially exploit the
film. The partners claim accelerated allowances and are taxed on the lease
rentals, so the effect is to permit partners to defer their tax liability.
The new anti avoidance rules are aimed at arrangements under which the
existing leases are replaced with new leases designed to qualify as long
funding finance leases of plant and machinery. The effect was to replace
taxable income with income that was largely tax free.
The new rules provide that rentals are taxable in full to the extent that
they are payable after 13 November 2008 and relate to periods after that
date.
These provisions should not affect the current scheme.
Our view
The new rules are a not unexpected response to a tax avoidance
arrangement.
