HSBC heads for blockbuster trial today over Disney film tax scheme
HSBC is set to defend itself today from a £240m legal action by more than 500 investors over a Disney film tax scheme.
The investors are suing the bank for what they say are losses caused by HSBC’s marketing of film financing schemes called Eclipse Partnerships.
The tax scheme was devised by HSBC’s Private Wealth Solutions’ team, and marketed by Future Capital Partners (now in liquidation) to investors between 2005 and 2008.
The claimants allege that HSBC were the key players in the development and marketing of the Eclipse Partnerships which were sold to them as an opportunity to invest in transactions with Disney in relation to certain film rights.
The investors believed they would benefit from tax relief by putting their money into film productions, with any losses being written off against their tax bills.
Despite that, HMRC denied them tax breaks because either the movies were not made or those receiving tax breaks did little to promote the productions. There have been investigations and litigation by the HMRC in relation to this scheme, which has resulted in the investors being presented with large tax bills.
There are two group actions against the bank: City law firm Edwin Coe, led by partners David Greene and Thomas Johnson and City law firm Stewarts, led by partners James Le Gallais and Alex Lerner. It was agreed by the High Court that both cases should be managed together.
The two cases are Christopher Bernard Upham and Others v HMRC and Akinluyi and ors v HSBC but this joint case is known as ‘the Eclipse litigation’.
The case against the bank is deceit, conspiracy, joint tortfeasors, dishonest assistance and for breach of obligations under the Financial Services and Markets Act 2000.
HSBC has said that it did not promote tax investment products. It has said that Eclipse was operated and promoted by Future Capital Partners, which went into liquidation in 2018. The bank has instructed British-American law firm Norton Rose Fulbright to defend it in this case.
The trial kicks off today at the Commercial Court for eight weeks in front of Mr Justice Bright.