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View Full Version : UK film TAX question (not Café material)


Eats_Crayons
02-23-2004, 10:03 AM
This is more of a tax/investment type question rather than an "arts" question...

Could someone explain this "tax loophole (http://news.bbc.co.uk/2/hi/entertainment/3505767.stm)" a bit? The Inland Revenue says investors "exploited" the loophole by putting money into a film but pulling out before it reached cinemas - and avoiding paying tax on their investment.I don't get it. How do they "pull out" of an investment like that? And is it something that is uniquely exploited my film investors or is it a more widespread practice with other forms of investments as well?

I am speculating that it's sort of the following:

Multi-millionnaire rich dude/dudette invests $1 million in a movie.

Before movie makes profit, dude/dudette severs all connections to the film.

This results in a $1 million dollar loss. (Even though film goes on to earn lots and lots).

The $1 million loss offsets some tax stuff -- like brings them into a different bracket or something.

Does the loss offset something? How does the multi-millionnaire due/dudette benefit from this? How the heck does the whole "pulling out" process work? Do they somehow "uninvest" the funds? How? Or is it like I speculate above and they lose the money they invest?