RBS gets £1bn in tax breaks for funding Harry Potter
The Royal Bank of Scotland has worked accounting magic by investing in the distribution of movies such as Harry Potter, Batman Begins and Troy. It put money into 25 companies to enjoy a billion pounds worth of tax breaks between 1998 and 2007, according to Bloomberg.
The deals involved a the bank’s front company buying the rights to a finished movie and then leasing it back to the studio for release in cinemas and on DVD. This means RBS did not pay a penny in production costs or risked poor performance at the box office. Overall, the bank invested in about 25 movies during the period.
“These are highly artificial transactions done solely for tax avoidance reasons,” Jolyon Maugham, a tax lawyer who has represented investors in similar plans told Bloomberg. He added that this does not mean that the transactions were illegal.
At least 10 of the 25 transactions have been probed by the UK tax collection agency, according to the publication. However, the bank is believed to have complied with the taxation rules in force at the time.
The front companies haven’t been closed and still receive income from movies deals. However, they were put into a non-core division after preferential taxation ended in 2007.
“Prior to 2008, RBS, like many banks, provided leasing contracts to media companies, including film production studios. These leases were compliant with tax law, including the use of tax allowances established to help boost the UK film industry during that period,”said a statement from the bank.
“The tax legislation changed in 2007, at which point RBS exited this business. We have worked with HMRC [Her Majesty’s Revenue and Customs] to make sure that all our tax obligations in regards to this portfolio have been met,” the statement added.