Pirates of the Caribbean franchise partly funded by rich British investors trying to avoid paying tax

Revelation emerged in testimony to the House of Commons Public Accounts Committee

The blockbuster Pirates of the Caribbean movie franchise was partly bankrolled by rich British investors trying to avoid paying tax, it has been revealed.

Members of a legal tax avoidance scheme used a loophole in legislation, designed to increase investment in making British films, to buy the world distribution rights to two of the hit Hollywood movies which already been made.

It was suggested that they were then able to write-off their investment against British tax liabilities – potentially resulting the taxpayer subsidising the American film.

The revelation emerged in testimony to the House of Commons Public Accounts Committee as part of its on-going inquiry into tax avoidance schemes.

Giving evidence Tim Levy, Director of Future Capital Partners, admitted that around half the money put into his film tax schemes had actually been invested not in British films but America ones.

He denied that the sole purpose of the investments had been to dodge tax in the UK.

But Margaret Hodge, chair of the PAC, said it was clear that the investment in Pirates of the Caribbean two and three had been designed as a tax dodge describing the situation as “potty”.

“The whole point (of the scheme) was to encourage in investing in making films in Britain,” she said.

“We have now established that was that you used this vehicle to purchase American films that had already been made. The only bit you were doing was using it as a vehicle to provide tax avoidance to the individuals.”

She added she was particularly angry by the revelation as she had been a minister in Culture Department at the time when the scheme was operating. She said she had believed it to be a genuine attempt to boost funding in British film making and was shocked that it had been so badly exploited. The loophole in the legislation has now been closed.

Mr Levy admitted that his company had created an investment vehicle for it clients to put money into Pirates – which had already been made - but said this was because there were not sufficient opportunities to invest in Britain.

“There were a number of investors who were interested in investing in the industry but there was insufficient supply on the product side,” he said.

The Committee also heard from the boss of a company who specialises in selling tax avoidance products to rich individuals.

He admitted that most, if not all, of the products that he sells are subsequently shut down by HMRC. However because tax law is almost never retrospective his clients can still save money on it.

He also said that because HMRC only had limited resources it did not always attempt to recover money invested illegitimately.

“We know that HMRC don’t have the resources to fight a sufficient number of these cases so some of these will go through,” said Aiden James, Director, Tax Trade Advisors.

Mr James was asked how many schemes that he’d marketed were now illegal.

He replied: “Most of them if not all of them”.

He was then asked: “So they’re all illegal and you’re now looking for the next loophole is that fair statement?”

He replied: “Yes.”

Ms Hodge said she was “very grateful” for his honesty but described the situation as “pretty gobsmaking”.

She then asked him: “Do you have any ethical basis for the business model on which you’re making money.

He said: “The law has become very complicated.”

The Deputy Chair of the committee Richard Bacon put it to him: “The model as I understand it is that most of the schemes that you introduce get closed down within a very short period of time.

“So what you do is aggressively target (clients) and get as many though in a short period time on the basis that HMRC cannot pass respective legislation and therefore they have a tax window where they can reduce their tax until HMRC wake up, close that one down by which time you’ve moved on the next one.

He replied: “I would agree with all that you’ve said apart from aggressively market.”

The inquiry continues.

Start your day with The Independent, sign up for daily news emails
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
Sport
footballShirt then goes on sale on Gumtree
Voices
Terry Sue-Patt as Benny in the BBC children’s soap ‘Grange Hill’
voicesGrace Dent on Grange Hill and Terry Sue-Patt
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
music
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
A poster by Durham Constabulary
news
Sport
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
Emily McDowell Card that reads:
artCancer survivor Emily McDowell kicks back at the clichés
Arts and Entertainment
Twin Peaks stars Joan Chen, Michael Ontkean, Kyle Maclachlan and Piper Laurie
tvBadalamenti on board for third series
Life and Style
tech
Sport
Standing room only: the terraces at Villa Park in 1935
football
Sport
Ben Stokes celebrates with his team mates after bowling Brendon McCullum
sportEngland vs New Zealand report
News
Amal Clooney has joined the legal team defending 'The Hooden Men'
people
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Guru Careers: Software Developer

£35 - 40k + Benefits: Guru Careers: We are seeking a Software Developer (JavaS...

SThree: Trainee Recruitment Consultant / Resourcer

£18000 - £23000 per annum + Commission: SThree: As a Trainee Recruitment Consu...

Ashdown Group: UI Developer - (UI, HTML, CSS, JavaScript, AngularJS)

£25000 - £40000 per annum: Ashdown Group: UI Developer - (UI, JavaScript, HTML...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine