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Tax avoidance firm faces closure as HMRC probes investors

Tax avoidance firm faces closure as HMRC probes investors

The company behind a tax avoidance scheme which left hundreds of investors facing possible bankruptcy is on the verge of closure.

Future Capital Partners managed the Eclipse 35 film rights scheme and the Elysian biofuel scheme, both of which left investors facing heavy liabilities after being challenged by the taxman.

A spokesperson for Future Capital was unavailable for comment.

A specialist financial litigation lawyer who has been following the case estimated that clients in the schemes would face liabilities in the 'tens of millions'.

Platform and Sipp prover James Hay last week said it was facing a possible £20 million fine over clients’ investments in Elysian – a financial hit which has left its parent group entertaining bids for sister company Saunderson House.

Football stars including Rafa Benetiz and Carlo Cudicini were also reported to have also been invested in the scheme, while Alex Ferguson, Sven-Göran Eriksson and Glenn Hoddle were among 780 people reported to have sunk up to £2.2 billion into the Eclipse scheme.

Lawyers acting on behalf of Eclipse investors warned that many would face bankruptcy following a demand by HMRC for penalties up to 20 times higher than their original investment in the fund.

Following an earlier challenge by the HMRC, Future Capital Partners has not accepted new business since 2014, and the funds are now administered by investment group Cocoon Wealth, which was founded in 2011 by Future chief executive Tim Levy.

In a statement to investors, Levy wrote: ‘Future Capital Partners Limited and its group are shortly to go into administration – or more likely – liquidation.

‘HMRC have issued a closure notice to [redacted] stating that they consider that the LLP is not tax transparent and that all project referral fees should be taxed as a dividend distribution on members.

‘This has been appealed, but such appeals will have to be funded to proceed to litigation in accordance with a strict timetable or will be struck out.  

'Should the appeals fail – or be struck out for lack of support/funding – the tax, as determined, plus interest for late payment, will become due.’

Investors in Eclipse saw their investments aggressively leveraged and the capital used to purchase distribution rights to major films. The rights were then relicensed back to the original holder, and relief claimed on the interest.

Tax breaks on film production were introduced in 1997 and were soon adopted to develop aggressive tax avoidance schemes. Many of these have now been legally challenged and shut down, with the then HMRC boss Dave Hartnett describing them in 2012 as ‘scams for scumbags’.

* This article has been amended with references to insolvency replaced with closure  

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