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Film tax avoidance scheme closed

A film tax avoidance scheme which routed profits of a tax advisory business through employee benefit trusts has been closed by a tribunal.

HM Revenue and Customs (HMRC) challenged tax deductions of almost £9m ($14m) which tax advisor John Dryburgh’s companies, Scotts Atlantic Management Ltd and Scotts Film Management Ltd, paid into Employee Benefit Trusts.

According to HMRC, the tax avoidance involved trying to extract profits from companies while at the same time securing corporation tax deductions. Employers paid money into an Employee Benefit Trust (EBT) and claimed corporation tax deductions. The EBT gave undervalued shares in a new company, causing a loss to the employer.

The Tribunal said: “There is no doubt that Mr Dryburgh not only lied to the Tribunal in a material way, but he appeared also to have fabricated evidence, forged documents and thrown away a memory stick in order to destroy evidence.”

Although Mr Dryburgh is in bankruptcy and Scotts Atlantic Management is in liquidation, HMRC believes that the cash can be recovered.

The exchequer secretary to the Treasury, David Gauke, said:

“This scheme – like so many others – was not worth buying into. The Government has made almost £1bn ($1.55bn) available to HMRC to tackle the issues of avoidance and evasion and to ensure that the minority who try to avoid their responsibilities pay the tax due.

“HMRC will always challenge this type of planning and the tribunal decision should send a clear message to anyone thinking they can get away with tax dodging – HMRC will pursue you and you will have to pay the tax due as well as interest, on top of the promoter’s fees.”

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