“Scotts Private Client Services Limited (the "Sponsor") is responsible for the information contained in this document. To the best of the knowledge and belief of the Sponsor (which has taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information. The Sponsor accepts responsibility accordingly.”
“they are not and should not be construed as forecasts of the likely returns from participating in the Partnership.”
“The tax analysis set out herein is based on the Designated Members’ understanding of current tax legislation and published practice and on UK Generally Accepted Accounting Practice (“GAAP”). However, prospective Members are advised to consult their tax advisers and are referred to the Risk Factors on page 19-20. Whilst no advance ruling procedures are available in the UK for transactions such as this, advice has been received from Mr Andrew Thornhill QC, a senior UK Tax Counsel and head of Pump Court Tax Chambers in respect of tax … Copies of the opinions of counsel … are available from the Sponsor.”
“1 Income Tax relief Relief from income tax may be obtained by: (a) setting off losses against general income in the year of assessment (i.e. in the years ending5 April 2003 and5 April 2004 ); (b) setting off any losses not completely absorbed in the year of assessment against income of the preceding year i.e. in the years ending5 April 2002 and5 April 2003 (in respect of a loss arising in the years ending5 April 2003 and5 April 2004 respectively); (c) reversing the order of set off at (a) and (b); (d) carrying back losses sustained in the first four years of assessment from commencement of trading for up to three years prior to the tax year in which the relevant loss is sustained, taking the earlier years first (for example, a loss sustained in the year ending5 April 2003 can be carried back and set off against income for the year ending5 April 2000 and subsequent years); and (e) carrying forward trading losses not relieved against general income to set against a Member's future income profits from the same trade. 2 Capital Gains Tax relief Relief from capital gains tax may be obtained by: (a) setting any losses not fully absorbed by general income of the year of assessment in which the relevant loss is sustained against capital gains for that year; and (b) setting any such losses not fully absorbed by general income of the preceding year of assessment against capital gains for that year.”
“Investment in the partnership involves substantial risks including certain tax risks, risks associated with the lack of liquidity of the investment and risks associated with the film business.”
“We hereby confirm to [Scotts] that the Subscriber is a customer of the Financial Advisor not a customer of [Scotts] and is not receiving advice from [Scotts].”
“1.1 SAML [i.e. Scotts], the Operator, the LLP and their respective officers and staff: - 1. 1.1 have not provided and do not provide any investment, taxation or other advice or recommendations for me generally and specifically in connection with [the Scheme]; 1. 1.2 have not been, and are not, responsible for assessing the suitability of [the Scheme] for me, any needs or any purpose or aim of mine; 1. 1.3 are not, and shall not be, responsible or liable in any manner for any loss resulting from any such advice, recommendations or assessment given by, or any negligence, fraud or otherwise of the independent financial adviser or other suitably qualified person (as referred to in 1.2 below) or resulting from any failure on my part to obtain such advice, recommendations or assessment; and 1. 2 it was, and is, my responsibility to obtain appropriate advice, recommendations and assessment, as referred to above, from an independent financial adviser or other suitably qualified person.”
“I have been asked to write a detailed opinion on the tax effects for a United Kingdom resident individual of entering into the partnership on the terms set out in the information memorandum in which this letter appears. Having advised previously on the structure of the arrangements, I am able to say that the explanation in the section "Taxation Consequences of Investing in the Partnership" is correct.”
“1. Does Counsel consider that the LLP will be carrying on a trade in the UK and that relief would be available to Members against other income under sections 380 & 381 ICTA 1988? Counsel will note that even if only the Minimum Guarantees (MGs) are received it is anticipated that the LLP will make a profit over the full trading period. 2. Does Counsel consider that the use of the Studio's subsidiaries to sub-distribute the films would impact upon the LLP’s trading status? 3. Does Counsel consider that the terms of the profit sharing arrangements between the Studio and the LLP and the sub-distributors would be considered to be consistent with a trade being carried on a commercial basis and with a view to realising a profit? 4. Are there any other actions, documentation etc., which Counsel considers should be put in place to more clearly evidence trading? 5. Is Counsel satisfied that the LLP would not fall foul of Section 381(4) ICTA 1988 if, as is projected, the LLP would not be profitable until the accounting period commencing6 April 2004 ?”
“The first question is whether the proposed LLP is trading. In my view, there is no doubt that it is. In essence, part of the overall activities of the business which Warner Bros and its associated companies carry on is being passed over to the LLP. This is inherently a commercial activity, carried on in the same way as similar activities in the commercial world. It may perhaps be said that it is not really a separate, identifiable part of that activity. In other words, although the essence of a trade is that it is a commercial activity carried on in the same way as analogous activities in the commercial world (see CIR -v- Livingston 11 Tax Cas 538 at p.542), nevertheless that does not mean you can take part of what would normally be the overall commercial activity and contend that part is a trade. The answer is that in the film world persons exist who do carry on a separate activity such as the LLP carries on. It is inherently much less risky than producing a film. In my opinion, therefore, there is here a commercial activity with parallels in the real world and carried on in the same commercial way as occurs in the film world. There is a trade. Could the Revenue argue nevertheless that there is something artificial about this trade. In effect, the LLP acquire rights from Warner Bros and then disposes of them back again. The LLP looks as though it has been placed in the middle of a commercial operation, not, it might be suggested, in order to perform any operation that Warner Bros could not perform, but in order to give its members a tax break. In days gone by, such an argument would have gained credence in the Courts. The founding authority was FA & AB -v- Lupton (47 Tax Cas 580) which was sometimes regarded as establishing the proposition that an alleged trade is not a trade if it is carried on for predominantly tax avoidance reasons. In my view, the case does not establish this. What it does establish is that if the way a trade is carried on is for tax (or any other) reasons substantially different from the way it would be carried on commercially, then it is no longer a trade. In other words if the activity is not carried on in the way that it would be carried on in the commercial world, it may well not be a trade. If that is the principle, it does not affect the LLP here. In my view, the correct principle was followed in the House of Lords in Ensign Tankers -V- Stokes[1992] STC 226 . There it was argued in all the Courts below that a partnership inserted between a producer and distributor for tax reasons was not trading. Lord Templeman, who gave the leading speech, had no doubt the partnership was trading. The real issue, in his opinion, was whether it had incurred the expenditure it had made. An attempt to resurrect the “Lupton principle” was made by Park J in the recent Barclays Mercantile case[2002] STC 1068 . It was firmly overruled by the Court of Appeal. In my opinion, the current position in law is that if a taxpayer carries on a commercial activity in a commercial way although his motive may be to obtain a tax advantage and although he is “sandwiched” into a larger commercial activity (as happens here and happened in Ensign Tankers), the activity is and remains a trade. I believe this answers questions 1, 2 and 3. In answer to question 4, 1 do not believe that any further actions or documents are required. I turn, therefore, to question 5. This concerns loss relief against other income. It is axiomatic that the trade is taxed under Case I (see s.391). In my view, the LLP’ s trade is clearly controlled from the United Kingdom and is taxable under Case 1 of Schedule D. Subsection (4) of section 381 requires the trade to be carried on a commercial basis (here I see no problem) and “in such a way that profits in the trade could reasonably be expected to be realised in that period or within a reasonable time thereafter”
“In my opinion, the analysis so far set out in this Opinion of losses and capital profits is correct. I do not see that it makes any difference that guarantees are backed. It only strengthens the guarantee. I fail to see how the transactions could be recharacterised as a sale and leaseback given the LLP’ s ability to make additional profits. I accept that there is a certain circularity involved. However, as already stated, this was a feature of Ensign Tankers. It did not lead to a reanalysis in itself.”
“This has now been firmly reversed, in my view, rightly. However, it remains helpful to identify similar activities in the commercial world. It is said that the LLP’s protection is greater. That in itself should not matter. It is a case of more or less risk and more or less upside. As regards the Lupton case, I firmly believe that it has no relevance for reasons already given. What is possible under the Ensign Tankers -v- Stokes decision is for the transaction to be commercially re-analysed. In this case, I would suppose the risk to be that the LLP and sub-distributors should be treated as though they were in some overall partnership because they are, in effect, carving up the distribution expenses and receipts. However, I do not see this as a credible re-analysis. In Ensign the re-analysis was simple. The non-recourse loan of 75 per cent of cost with a right to 75 per cent of income and no repayment was a 75:25 joint venture.”
“1. I have read the section headed "Taxation Consequences" in the draft Information Memorandum. I approve the contents and note that a Partner's capital contribution will not be established until a withdrawal has been made for the advance interest. If this is done, then a Partner's interest relief under section 362 ICTA 1988 should not be restricted by section 363. I also confirm that the Statement of Taxation Consequences appears to me to be complete and not to contain any material omissions. 2. I confirm the Statement attributed to me under "Non-Resident Partner" on what is page 19 in my copy of the Information Memorandum. 3. I confirm the accuracy of the statements under "Expected Tax Outcome" in the section headed "The Offer". 4. The statements under "Tax Risks" in the section headed "Risk Factors" are, in my view, a [sic] accurate and complete.”
“My Lords, I consider that it follows and that it should now be regarded as settled that if someone possessed of a special skill undertakes, quite irrespective of contract, to apply that skill for the assistance of another person who relies upon such skill, a duty of care will arise. The fact that the service is to be given by means of or by the instrumentality of words can make no difference. Furthermore, if in a sphere in which a person is so placed that others could reasonably rely upon his judgment or his skill or upon his ability to make careful inquiry, a person takes it upon himself to give information or advice to, or allows his information or advice to be passed on to, another person who, as he knows or should know, will place reliance upon it, then a duty of care will arise.”
“If he chooses to adopt the last course he must, I think, be held to have accepted some responsibility for his answer being given carefully, or to have accepted a relationship with the inquirer which requires him to exercise such care as the circumstances require.”
“in the light of the disclaimer, how could it have been reasonable for the appellant to rely on the representation?”
“(a) The precise relationship between (to use convenient terms) the adviser and the advisee. This may be a general relationship or a special relationship which has come into existence for the purpose of a particular transaction. But in my opinion counsel for Overseas was correct when he submitted that there may be an important difference between the cases where the adviser and the advisee are dealing at arm’s length and cases where they are acting ‘on the same side of the fence’. (b) The precise circumstances in which the advice or information or other material came into existence. Any contract or other relationship with a third party will be relevant. (c) The precise circumstances in which the advice or information or other material was communicated to the advisee, and for what purpose or purposes, and whether the communication was made by the adviser or by a third party. It will be necessary to consider the purpose or purposes of the communication both as seen by the adviser and as seen by the advisee, and the degree of reliance which the adviser intended or should reasonably have anticipated would be placed on its accuracy by the advisee, and the reliance in fact placed on it. (d) The presence or absence of other advisers on whom the advisee would or could rely. This factor is analogous to the likelihood of intermediate examination in product liability cases. (e) The opportunity, if any, given to the adviser to issue a disclaimer.”
“But, on the basis that the court is deciding whether to treat the defendant as having assumed legal responsibility to the third party, non-client, for his actions, it will be necessary to balance the foreseeability that the third party will rely on the professional to perform their task in a competent manner against any other factors which would make such an imposition of liability unreasonable or unfair”
“(1) The Innovator Schemes were commercial in nature – potential investors were being invited to subscribe to partnerships undertaking commercial trading in the acquisition and exploitation of technology; (2) The minimum gross investment in the Innovator partnerships was£250,000 ; these Schemes were not directed at people of modest means; they were directed at HNWIs who had (access to) their own advice and who dealt through IFAs; those IFAs would be expected to advise the Claimants as to the risks inherent in investment into the Schemes; (3) The Claimants were largely sophisticated investors and would, accordingly, have reasonably been expected to understand those parts of the IM which: (i) Stated that Innovator (and thus Innovator’s advisers) were not to be regarded as giving any advice, representation or warranty (expressed or implied) to any person in connection with the contents of the IM; (ii) Stressed the need for each potential investor to obtain independent advice; (4) It was reasonably to be expected that any person with sufficient wealth and potential tax liabilities to be a potential investor would seek and obtain specialist accountancy and/or taxation advice on a regular basis, and thereby have easy and convenient access to independent advice in relation to the contents of the IM; (5) At least some of the Claimants did obtain independent advice prior to investing in the Schemes; (6) Those Claimants who did obtain independent advice were apparently informed that the investments were suitable (e.g. Mr Tallaksen, Ms Knight and Mr Jackson); (7) The terms of the subscription agreements meant it was objectively reasonable to assume that independent professional advice would be taken and that each investor would be able to bear the financial risk of participation.”
“It was clearly foreseeable that if Mrs Estill [the settlor] was negligently advised and the trustees became liable to pay tax, the trustees would suffer loss. The instructions sought advice for the benefit of the trustees as well as Mrs Estill: see for example questions 2 and 3 in counsel's instructions. The fact that the trustees had not been finally selected at the stage advice was given does not mean that advice could not be sought on their behalf. Accordingly, in my judgment the defendants owed duties of care to the trustees. As I see it, the defendants’ clients included the trustees.”
“[WB] will have a right to substitute a film if for any reason, one of the Slate films is not available, in full satisfaction of their completion guarantee.” (2). The claimants contend that the LLPs lacked sufficient control over P&A Costs, given the right of the Sub-Distributors to spend in excess of the budgeted amounts and to recoup such expenditure from future income in priority to the LLP. These rights of the Sub-Distributors’ rights were, however, fully explained in the Memorial, and in the IM itself. The Memorial stated that it was “likely” that the Sub-Distributors would meet excess P&A Costs in this way. The IM also stated that surplus income “will be expended” by the LLP on additional films. (3). The claimants contend that there were no genuine commercial comparators, because the only examples of the business the LLPs were to conduct being conducted elsewhere involved much lower levels of guarantees and greater decision making by the relevant entities. All that is known about the comparators, however, was set out in the Memorial. That included that as a result of the lower level of guarantees in the comparators, “potential losses could be made but they would have a better position on the first revenues”
“In general, I am of the opinion that in the absence of a disclaimer of liability the valuer who values a house for the purpose of a mortgage, knowing that the mortgagee will rely and the mortgagor will probably rely on the valuation, knowing that the purchaser has in effect paid for the valuation, is under a duty to exercise reasonable skill and care and that duty is owed to both parties to the mortgage for which the valuation is made.”
“(1) It was never the intention of the Tilling Group that the taxpayer company should be a commercial success but that its primary purpose was to improve the group's earnings and cash flow by tax deferral. (2) Guinness Mahon (through Mr. Wilde) negotiated the terms of the scheme with L.P.I, as bankers seeking to offer a tax avoidance scheme to investors. As to the commercial terms, Guinness Mahon "took what Lorimar was prepared to give." (3) In considering the importance to the taxpayer company of making a commercial profit, they held that Mr. Whitfield's calculations demonstrated: "that even the cash flow position of 300 per cent cost recovery is markedly inferior to that obtaining on a complete flop. The best position by far... is obtained on 50 per cent cost recovery." (4) The transaction was aptly described in documents which predated the formation of Victory Partnership by Guinness Mahon as "a tax deferral scheme" and by Mr. Black, a senior executive of the Tilling group, as "a scheme." (5) "Escape to Victory" was originally budgeted at $ll.5m., but this budget had increased to$13m . Mr. Whitfield was aware that by21 June 1980 the film was already$20,000 over the budget of$13m ., contingency allowance of $lm. having been exhausted, and may have been aware that by 5 July it was$0.50m . over budget. Yet this caused the taxpayer company no concern. (6) The Tilling Group had envisaged that, since the completion of the film was dependent on L.P.I. finance, the possibility of L.P.I.'s insolvency would be covered by a bank guarantee, but no such guarantee was ever sought. (7) There were certain features of the documents executed on 14 July which, in their view, "tended to diminish any faith in their commerciality." (8) The partnership did little after14 July 1980 . (9) Mr. Wilde and Guinness Mahon, as controllers of Victory Productions, did not take very seriously their responsibilities as managing partners, paying little or no regard to cost control of the film. This was inconsistent with "normal commercial behaviour" even taking into account the non-recourse basis of the loans from L.P.I. (10) The taxpayer company's motive and objective in entering into the "Escape to Victory" transaction was to produce for the Tilling Group beneficial tax allowances by means of first-year allowances. (11) The taxpayer company had no commercial motive in entering into the transaction: "it invested in 'Escape to Victory'... for fiscal reasons not caring whether they made a profit or not." (12) The total uncommerciality of the taxpayer company's approach was demonstrated when Mr. Black, in the course of his re-examination, was asked whether the Tilling Group would have entered into the transaction "at any cost," and replied "Yes."”
“whether, in the light of all relevant circumstances, the transaction is capable of being fairly regarded as a transaction in the nature of trade, albeit one intended to secure a fiscal advantage or even conditioned in its form by such intention; or is incapable of being fairly so regarded but is in truth a mere device to secure a fiscal advantage, albeit one given the trappings normally associated with trading transactions.”
“[t]he financial terms of any transaction entered into in such circumstances must be jealously scrutinised to ascertain whether they were nevertheless reasonable commercial terms such as might have been negotiated by parties with a normal concern to make profits, or whether they were so loaded against them as to eliminate or significantly reduce their prospects of making profits.”
“In my judgment there is only one possible answer to this question once the facts found by the commissioners are properly assembled and each is placed in its correct setting.”
“In these circumstances the question of law which arises from the facts found by the commissioners can be formulated as follows: where a partnership enters into a commercial transaction with a view of profit, can it fairly be regarded as carrying on a trade even if (i) it obtained the necessary finance from investors who were primarily motivated by the hope of obtaining a fiscal advantage rather than a commercial profit and (ii) the transaction itself was deliberately structured in order to secure the fiscal advantage without ceasing to be commercial or jeopardising the prospects of profit? In my judgment, this question must be answered in the affirmative.”
“It seems plain to me that BMBF incurred expenditure on the provision of the Pipeline by a transaction which, despite having a fiscal element in it, in that capital allowances were to be obtained and passed on to the lessee in the form of lower rentals, was a genuine trading transaction. I would hold that the facts of the present case are far removed from the artificial structure employed in a dividend−stripping scheme such as that used in the Lupton case.”
“An attempt to resurrect the “Lupton principle” was made by Park J in [BMBF]. It was firmly overruled by the Court of Appeal.”
“These submissions were attractively presented by Mr Furness, but I am unable to accept them. At the most basic level, it is now clear from Eclipse, if it was not clear before, that the question whether what the taxpayer actually did constitutes a trade has to be answered by standing back and looking at the whole picture: see [111]. Although it is a matter of law whether a particular activity is capable of constituting a trade, whether or not it does so in any given case ‘depends upon an evaluation of all the facts relating to it against the background of the applicable legal principles’: see [112]. It follows that it can never be appropriate to extract certain elements from the overall picture and treat them, viewed in isolation, as determinative of the issue. But that, in essence, is what Mr Furness is inviting us to do, when he says that the purchase and leaseback (or onward lease) of a film are inherently trading activities. There is no dispute that such activities are capable of forming part of a trade, and in many contexts the only reasonable conclusion would be that they did form part of a trade. But when the whole picture is examined, the conclusion will not necessarily be the same. The exercise which the FTT has to undertake is one of multi-factorial evaluation, and their conclusion can only be challenged as erroneous in point of law on Edwards v Bairstow grounds: see Eclipse at [113].”
“It cannot be right, therefore, to assert, as the Crown did before us, that whenever something is bought to re-sell at a profit an adventure or concern in the nature of trade necessarily results, and any finding of the Commissioners to the contrary must be perverse. Otherwise, there would hardly be any need to introduce a capital gains tax. It would virtually be here already. The true position, in my opinion, is that all the facts in each case must be considered, not merely the motive of acquisition, and a conclusion arrived at from such a comprehensive review.” (2). Lupton (above) where, at p.660, Lord Simon said: “share-dealings and other business transactions vary almost infinitely; and to determine whether the transaction is, on the one hand, a share-dealing which is part of the trade of dealing in shares or, on the other, merely a device to secure a fiscal advantage, all the circumstances of the particular case must be considered.” (3). Ransom v Higgs[1974] 1 WLR 1594 , where, at p.1606 Lord Morris said: “in considering whether a person carried on” a trade it seems to me to be essential to discover and examine what exactly it was that the person did.”
“It is clear that the question whether or not there has been an adventure in the nature of trade depends on all the facts and circumstances of each particular case and depends on the interaction between the various factors that are present in any given case.”
“if, in order to get what he wants, the taxpayer has to embark on an adventure which has all the characteristics of trading, his purpose or object alone cannot prevail over what he in fact does. But if his acts are equivocal his purpose or object may be a very material factor when weighing the total effect of all the circumstances.”
“Before you can take an informed view as to whether particular activities amount to trading you must obtain and carefully consider all the facts.”
“Our research has shown that this business is indeed carried on in at least two separate contexts. The first is independent investors providing funding through dedicated companies distributing films. Beyond decision taking on amount of spend and films they, like the proposed LLP, they [sic] have no film distribution infrastructure. The second are the major the [sic] Studios who will enter into arrangements with independent producers whereby they would (among other things) distribute their films and provide the funds for doing so on agreed terms. In both cases the levels of minimum guarantees, if indeed there were any, are thought to be much less. As a result potential losses could be made but they would have a better position on first revenues, resulting in a much lower hurdle rate for revenues beyond the minimum sums.”
“…it was suggested that the best guide is to view ‘commercial’ as the antithesis of ‘uncommercial’, and I do find that a useful approach. A trade may be conducted in an uncommercial way either because the terms of the trade are uncommercial (for example, the hobby market-gardening enterprise where the prices of fruit and vegetables do not realistically reflect the overheads and variable costs of the enterprise) or because the way in which the trade is conducted in uncommercial in other respect (for instance, the hobby art gallery or antique shop where the opening hours are unpredictable and depend simply on the owner’s convenience). The distinction is between the serious trader who, whatever his shortcomings in skill, experience or capital, is seriously interested in profit, and the amateur or dilettante.”
“(i) The question of whether a solicitor is in breach of a duty to explain the risk that a court may come to a different interpretation from that which he advises is correct is highly fact-sensitive: the Queen Elizabeth’s Grammar School case [2002] PNLR 14, Herrmann’s case [2012] PNLR 28, Balogun’s case [2017] PNLR 20 and the Levicom case [2010] PNLR 29; (ii) If the construction of the provision is clear, it is very likely that whatever the circumstances, the threshold of “significant risk” will not be met and it will not be necessary to caveat the advice given and explain the risks involved; (iii) However, depending on the circumstances, it is perfectly possible to be correct about the construction of a provision or, at least, not negligent in that regard, but nevertheless to be under a duty to point out the risks involved and to have been negligent in not having done so (the Levicom case and Balogun’s case); (iv) It is more likely that there will be a duty to point out the risks, or to put the matter another way, that a reasonably competent solicitor would not fail to point them out when advising, if litigation is already on foot or the point has already been taken, although this need not necessarily be the case (the Queen Elizabeth’s Grammar School case to be compared with Balogun’s case); and (v) The issue is not one of percentages or whether opposing possible constructions are “finely balanced” but is more nuanced.”
“Does Tax opinion provide unequivocal agreement to the statements made in relation to taxation?”
“It is not disputed that the date when the Claimants suffered their claimed losses was when they made their investments.”
“it was not inevitable at that point that they would be denied the tax relief and they may have been financially better off as a result of being exposed to the risk, but it was at that point that they were tied into the “commercial straightjacket”.”
“the claimants entered into the contractual documentation for the film scheme in July 2007 and it was at that point that they suffered the damage; at that point the ‘defect’ in the form of advice was incapable of cure and they were tied into the “commercial straightjacket”.”
“The claimant’s liability to pay interest on the unpaid NIC to HMRC was in no relevant sense contingent. A contingent liability is a liability which, by reason of something done by the person bound, may or may not arise depending on the happening of a future event… That was not the position in the present case. There was either an actual liability to pay NIC and interest on arrears or there was not. The existence of such liability is not contingent on HMRC succeeding or failing in a tax tribunal… All the tribunal or court is deciding is whether or not there is an actual liability…The fallacy…is demonstrated by [counsel’s] submission that where a debt is incurred, but disputed, and court proceedings follow, the liability is contingent until the court gives judgment in favour of the creditor… That submission is clearly wrong.”
“I require this for compliance purposes.”
“(5) For the purposes of this section, the starting date for reckoning the period of limitation under subsection (4)(b) above is the earliest date on which the plaintiff or any person in whom the cause of action was vested before him first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action.”
“(a) of the material facts about the damage in respect of which damages are claimed; and (b) of the other facts relevant to the current action mentioned in subsection (8) below.”
“(a) from facts observable or ascertainable by him; or (b) from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek; but a person shall not be taken by virtue of this subsection to have knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice.”
“We do not know whether the Inspector will successfully persuade his head office to back his arguments. He has thus far failed to do so. IIMRC are already pursuing so many cases and using up the budget that was allocated to them for this purpose that we do not know whether they will pursue this matter particularly where the law was changed a long time ago to dissuade further investments. If he is successful in getting his head office to back his arguments he will issue closure notices and the LLP's will have to appeal these. A fund is being held of c£300,000 to pursue an appeal, if necessary and Scotts Atlantic will continue to provide its time without charge up to and during any appeal to the First Tier Tribunal.”
“I was getting that advice from Dr Martin”
“It is of vital importance that the Partnership is seen to be carrying on a trade…”
“In general our opinion is that the Scheme appears to contain the expected features of a film exploitation partnership and that it is structured so as to satisfy the conditions necessary to achieve Inland Revenue recognition of its trading status.”
“I just remember in the meeting Bernie Walsh was a great sales guy, he explained the scheme to me, drew some flow diagrams, how it would work, he could see I was interested. It was his trump card right at the end to say that Mr Thornhill, one of the best tax barristers in the land -- and, “If he said it's going to work, it's going to work.”
“In deciding to join SAD3, I relied upon Mr Thornhill QC’s opinion and endorsement. I would not have invested if his opinion as to whether the Scheme would work had not been obtained: I knew it was a tax scheme and if it had not been backed by a tax specialist then, even with my limited knowledge at the time, I would have challenged it. I am clear that if his advice had been that there was a material or higher risk that SAD3 would fail, I would not have invested in it. My risk appetite was just not there, and never has been. If there had been any qualifications or risk warnings from Mr Thornhill QC associated with investing in the Scheme, I would not have invested.”
“I was aware of tax counsel opining, and I considered that to be expert opinion: Mr Wilson-Gough’s opinion could never come close to being as important as that. There had to be some expert other than him confirming that it was not something the Revenue would have had a problem with. I have a very vivid memory that it was the fact that there was leading counsel that made me think this was all bona fide.”
“I believe I read the [SAD1 Opinion] prior to investing in SAD1. I was aware that Mr Thornhill QC’s advice was that the Scheme was a bona fide investment that would satisfy the requirements of HMRC.”
“I didn’t need to take it from Mr Thornhill because as far as I was concerned, Mr Thornhill had already advised the scheme that I was investing into and therefore – we have gone through this before. I mean, my understanding was that I was investing into a scheme that was very robust. It had the right people signing off on it with their opinion.”
“…we have taken extensive advice from our own Tax Consultants, from the providers of the schemes themselves and from Independent Tax Counsel. What we can report back to the Clients of Kirkham Motte is very heartening. We can confirm that the Legislation highlights that any scheme which existed before February 10th 2004; that has audited expenditure prior to this date; and is a genuine Production vehicle, will be eligible for Tax relief on losses incurred. These specific attributes apply to the schemes marketed by us i.e. Scott’s and Defender…”
“As stated on the Risk Warning Notice neither Ward Consultancy PLC nor the partnership provides any guarantee that the arrangements will be acceptable to the Inland Revenue, and hence that tax relief will be granted. However, there are good reasons to expect that the arrangements will be accepted and relief granted.”
“Investment made on advice from Ward that govt announcements of feb 10th 2004 will not jeopardise returns or scheme.”
“Liquidator has been in touch re Scott’s film schemes. Nothing from HMRC but concerned about the position and will retain cash to cover (est. c.£3m ).”
“I fully understand your concerns but trust the attached Counsels Opinion and the Letters of Comfort from Scotts ease your mind. I believe the issue became clear when we ran through the Revenue statements but to clarify Counsels Opinion is that because the expenditure was committed before the 10th February the old rules apply even for those Partners entering the Partnership after this date.”
“– have IR seen & approved scheme.”
“Julie, Many thanks for this. I appreciate your input into this…” and then stating that he had double-checked the issue and had been assured “by the fund and the advisers, supported by QC evidence (A. Thornhill)” that because the LLP had incurred losses prior to10 February 2004 he would be able to claim relief against those prior losses. His manuscript note ended: “I hope this sheds some light but would really appreciate any guidance you might supply on the efficacy and robustness of the arguments presented which imply the viability of the tax offset”
“I would also remind you that this scheme is currently not inland revenue approved, although clients of Scotts have already received the tax back on the 2002/03 product. Council’s [sic] opinion is reasonably confident it will receive approval and, as we discussed, the LLP will be trading under the normal rules that apply to all Partnerships and LLP.”
“the fact that there was the legal opinion of a prominent Queen’s Counsel who was a specialist in the area gave me comfort. If his advice had been that there was a material or higher risk that SAD2 would fail, I would not have invested in it because it would have meant that the Scheme would not have done what it was designed to do … If there had been a qualification or risk warning from Mr Thornhill that there was a concern that the partnership was not trading, that would have influenced my decision.”
“Such an opinion would have been technical, and, like a surgeon’s report, probably would not have made any sense to me. I was satisfied that as it appeared good enough for Barclays and Ernst & Young to be involved in the Scheme and that was good enough for me.”
“I felt that an entity like Ernst & Young would not have got involved unless they had done their own due diligence”