Royal Bank of Scotland enjoyed tax breaks and deferrals amounting to an estimated £1bn after financing the film distribution rights to a string of blockbusters including Troy, Batman Begins and two of the Harry Potter series.
Tax experts from the bank, which is now majority-owned by UK taxpayers, spent years building a £3.8bn film distribution financing portfolio to exploit generous tax benefits designed by ministers to aid the UK film industry.
Distribution rights were acquired by the bank, then leased back to the film studio. The scheme, which ran from 1998 to 2007, encouraged banks and other lenders to finance cash-strapped studios. Only investments of more than £15m qualified for the tax break.
According to Bloomberg research into 25 film distribution financing companies, RBS took tax breaks and deferrals amounting to £1bn.
The government’s generous tax breaks for the film industry have become a source of controversy after several tax avoidance experts built highly artificial structures to unlock aggressive tax gains. This has led to a welter of tax disputes and court clashes, many of which have yet to be resolved. Scores of Britain’s wealthiest bankers, footballers and celebrities are known to have invested in controversial film partnership schemes being challenged by HRMC.
According to Bloomberg, some of RBS’s investments have also been challenged by HMRC. A source close to RBS stressed its investments never sought to stray beyond the intended tax breaks, though on two occasions accelerated tax benefits enjoyed by the bank had been challenged by HMRC. In both cases, RBS accepted that the value of tax benefits received had not, in retrospect, reflected the worth of the distribution rights. As a result, part of the tax benefit that had been claimed was unwound.
RBS said: “Prior to 2008, RBS, like many banks, provided leasing contracts to media companies, including film production studios. These leases were compliant with tax law, including the use of tax allowances established to help boost the UK film industry during that period.
“The tax legislation changed in 2007, at which point RBS exited this business. We have worked with HMRC to make sure that all our tax obligations in regards to this portfolio have been met.”
This article was written by Simon Bowers, for theguardian.com on Tuesday 16th February 2016 19.38 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010