As Hundreds of Film Tax Scheme Investors Sue HSBC, Financial Crime Specialist Niall Hearty, Rahman Ravelli Details Case – Litigation, Mediation & Arbitration

UK: As hundreds of investors in a film tax scheme now sue HSBC, Niall Hearty of financial crime experts Rahman Ravelli details the case

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More than 500 investors are now involved in a lawsuit against HSBC over Disney film funding tax schemes.

The High Court has combined two separate class claims against the bank, meaning 177 investors are added to a legal action that already involved 371.

The investors are suing the bank for what they say are losses caused by HSBC’s marketing of film financing programs called Eclipse Partnerships. In their claim, the investors accuse HSBC of conspiring with Eclipse to persuade them to buy the film rights to blockbuster films under a tax deferral scheme. The investors, who received large tax bills from HM Revenue and Customs (HMRC), argue that HSBC is liable for fraud.

Investors thought they would get a tax break by investing their money in film productions, with any losses deducted from their tax bills. But HMRC denied them tax breaks because either the films weren’t made or those who get tax breaks didn’t do much to promote the productions.

Eclipse was open to investors between 2006 and 2008. Investors involved in the lawsuit claim that although it was marketed as a legitimate and tax-efficient investment, HSBC misrepresented the true nature of the business.

HSBC said it does not promote tax investment products. He said Eclipse was operated and promoted by Future Capital Partners, which went into liquidation in 2018.

The case is expected to be heard in 2024, when the cases of 28 investors – known as sample plaintiffs – will go to court.

The legal action follows HMRC’s offer of settlement late last year to current and former members of Eclipse. Under the proposal, HMRC agreed to settle with the Eclipse investors if they waived their claims for relief from interest, paid tax avoided, paid interest on overdue tax paid and waived any legal action related to Eclipse involving HMRC.

While an HMRC settlement may have saved some investors from financial ruin and years of uncertainty, the lawsuit against HSBC involves investors seeking legal remedies for losses they believe have been caused by HSBC through its development and marketing of the film financing program.

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