RBS gained £1bn from motion picture tax breaks

RBS gained over £1bn in tax breaks from investments it made in the UK film industry, it has been revealed.

A report from Bloomberg alleges that the bank, which received a £45bn government bailout in 2008, established 25 companies to invest in the UK film industry between 1997 and 2007 so it could benefit from government tax reliefs.

According to Bloomberg research, RBS took part in movie “sale and leaseback” schemes, whereby its 25 companies would buy the rights to completed films and then lease them back to the studio.

The films would then be released in the cinema and later on DVD and online, making RBS a profit on its investment. The bank was able to offset the cost of the films against its profits, lowering its corporation tax bill.

Under agreements with the studios, RBS did not pay for any of the films production costs and would not risk any losses if the films tanked at the box office. All of the RBS companies are still active and making a profit for the bank.

Between 2003 and 2006, RBS avoided or delayed paying approximately £1bn in tax using the deals, according to calculations based on public filings and historic tax rates.

Leases were ‘compliant with tax law’

The reliefs were set up in 1997 as the government looked to support the British film industry, but were later used by investors for tax purposes. In 2007, ministers strengthened the rules around the tax breaks and instructed HMRC to investigate companies that profited from the scheme. It is understood that HMRC has investigated ten of the 25 companies so far.

Last year it was announced that the government plans to extend tax breaks for the production of films in the UK that have received approval from the European Union.
Company filings reveal that the bank owns the rights to multiple Hollywood blockbusters, including Batman Begins, Troy and two films in the Harry Potter series.

Responding to these allegations, a spokesman for RBS said, “Before 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.

“The tax legislation changed in 2007, at which point RBS exited this business. We have worked with HMRC to make sure that all our tax obligations in regards to this portfolio have been met.”

HMRC has also responded to the report stating: “When HMRC believes a taxpayer has avoided tax, we will demand they pay the full amount due, which can include interest and penalties. Anyone refusing to pay will face legal proceedings.”