Sun shines on Eclipse at last

A considerable weight will be removed from the minds of investors in the various Eclipse Film Partnerships with HMRC’s announcement on 6 September of a settlement opportunity.

The Eclipse film schemes were intended to offer a deferral of tax.  Very broadly, the purported effect was that the partnerships came to have a stream of (taxable) income and the members a stream of (tax-deductible) interest payments of a similar amount.  The trick was in the timing: the interest relief came in the early years of the scheme, while the income arose in the later years: hence the tax deferral.  (Those with a close interest in the schemes will recognise that that is an oversimplification, but it’s close enough for now.)

Unfortunately, a court case in 2015 [2015] EWCA Civ 95 held that the partnerships weren’t trading.  That had the catastrophic effect that while the income remained taxable the interest wasn’t deductible – effectively creating the infamous ‘dry tax’ charge.  Cue panic among investors and multimillion-pound professional negligence claims.

Since then, the matter has rumbled on in a manner that makes Jarndyce v Jarndyce look like a model of expeditious litigation, including numerous references back to court and issue and withdrawal of accelerated payment notices.

So HMRC’s announcement of a settlement opportunity drawing a line under the proceedings is very welcome indeed (almost as much, we suspect, to those at HMRC who have been struggling with this for years as to investors).

The terms of the settlement opportunity are simple.  In HMRC’s words:

You must:

  • give up your Eclipse interest relief claims and pay the tax avoided
  • pay the interest on the tax paid late
  • give up any legal actions which are part of other Eclipse related litigation involving HMRC

Payment arrangements can be tailored to individuals’ circumstances, if appropriate.

HMRC will not pursue individuals for tax on income treated as paying back borrowings, including for periods after individuals had exited the LLPs.

The settlement opportunity will recover all the tax avoided and will also avoid further litigation.

We understand that HMRC will be writing to all known users of the Eclipse schemes in the next few weeks with further details and the settlement opportunity will be open for acceptance for six months from then.

We envisage that most investors in the Eclipse film partnerships will want to take up this settlement opportunity.  For more details, please get in touch with your usual BKL contact or use our enquiry form.



Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.


Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.


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