The King (on the application of Christopher Rokos) v Commissioners for HM Revenue and Customs

Hearing dates: 26 and 27 February 2025

Approved Judgment

This judgment was handed down remotely at 15.00 on Thursday 26 March 2026 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Introduction.

Mr Rokos the claimant is a High-Net-Worth individual who became involved in a number of film finance schemes about 20 years ago, designed to minimise his exposure to tax and, eventually, there is no dispute, found to be ineffective to avoid tax. In very broad terms the purpose of the schemes was as tax avoidance schemes which were designed to raise money for the film industry, and to use the likely resulting early losses, as relief against other tax liabilities of the investors.

The schemes, one of which was notified under the direct tax Disclosure of Tax Avoidance Schemes (“DOTAS”) rules, involved two entities (partnerships) which were established in 2006. HMRC say that they opened valid enquiries into the tax positions of the partners including the claimant, with the relevant entities in January 2008 for one, and in December 2008 in respect of the other.

The claimant challenges two decisions of HMRC

“(a) the decision to issue Mr Rokos with a notice of amendment under s28B(4) Taxes Management Act 1970 for the tax year 2005/06.

(b) HMRC's decision to issue Mr Rokos with a notice of amendment under s28B(4) Taxes Management Act 1970 for the tax year 2006/07.”

on the grounds that each of the above notices of amendment was unlawful by reason of the fact that the prior notices of amendment made to the relevant tax returns of the claimant's partnerships were themselves unlawful. Those partnerships are:

(a) For 2005/06: Trojan Film Partners (“Trojan”)

(b) For 2006/07: Invicta Film Partnership No.41, GP (“Invicta41”)

The Partnerships Trojan

In more detail, in the 2005/06 tax year, Mr Rokos invested money as a partner in Trojan Film Partners (“Trojan”). In the 2006/07 tax year, he invested money separately as a partner in Invicta Film Partnership No.41, GP (“Invicta41”). Each of Trojan and Invicta41 was, and is, a general partnership. Each partnership reported substantial trading losses in their tax returns for 2005/06 (in the case of Trojan) and 2006/07 (in the case of Invicta41).

The tax history, which includes a later move offshore, is set out by Mr Skerrett, who at the time the claim was brought was a partner at Simmons and Simmons LLP (“Simmons and Simmons”), acting for the claimant. There is no statement from the claimant. Mr Skerrett swore the statement in support of the claim. He set out a summary of the claimant's relevant tax position with regard to Trojan in that statement (omitting references) it included that:

“15. Trojan was a tax planning opportunity promoted by an organisation known as Ingenious Films or Ingenious Media (“Ingenious”) for the benefit of high-net-worth individuals. The Claimant was introduced to the opportunity through an advisory firm known as Dominion Fiduciary Services Group …[there is an] engagement letter between the Claimant and Dominion dated 8 February 2006

16. On or around 9 March 2006, the Claimant executed the partnership deed for Trojan and became a partner. The Claimant made a capital contribution to Trojan of £4,816,346. Of this amount the Claimant contributed £1,050,445 from his own capital and funded the remainder with a loan from the Bank of Ireland…

17. Before the end of the tax year on 5 April 2006, Trojan incurred expenditure acquiring rights in respect of certain films from the film producers. These film rights qualified as ‘master versions’ of the films in question, which meant that Trojan was able to treat the expenditure on the film rights as revenue expenditure in accordance with the rules in Chapter 9 of Part 2 Income Tax (Trading and Other Income) Act 2005 (“ITTOIA 2005”), when it would otherwise have been capital expenditure subject to relief through the capital allowances regime. The films in question were classified for the purposes of ITTOIA 2005 as ‘limited—budget films’, and as a result Trojan was able to take the expenditure on the film rights into account in full when computing its profits and losses for the tax year 2005/06.

18. The Trojan partnership tax return for 2005/06 recorded a trading loss of £15,990,705. The partnership statement recorded that the Claimant's share of that trading loss was £3,522,727.”

The statement also detailed how for year 2009/2010 Dominion took over control and management of Trojan who arranged to migrate the partnership offshore. Mr Rokos' profits were then non-UK source income and taxable on a remittance basis; he did not remit any income.

Invicta41

In respect of Invicta41 the following was set out.

“27. Invicta41 was a tax planning opportunity promoted by an organisation known as Invicta and introduced to the Claimant by Dominion …[there is an] engagement letter between the Claimant and Dominion dated 19 December 2006.

28. The Invicta41 partnership deed was executed on 8 September 2006 between two corporate members: Anglo Film Nominees (GP) Limited and Sovereign Film Nominees (GP) Limited … the Claimant became a member of Invicta41 in around January 2007. The Claimant made a capital contribution to Invicta41 of £20million. Of this amount the Claimant contributed £4.6million from his own capital and funded the remainder with a loan from the Royal Bank of Scotland (the “RBS Loan”) …

29. Before the end of the tax year on 5 April 2007, Invicta41 incurred expenditure acquiring rights in respect of certain films from the film producers. Similarly to Trojan above, the film rights qualified as ‘master versions’ of ‘limited-budget films’ and Invicta41 was able to take the expenditure into account in full when computing its profits and losses for the tax year 2006/07.

30. The Invicta41 partnership tax return for 2006/07 recorded a trading loss of £30,927,802. The partnership statement recorded that the Claimant's share of that trading loss was £19,656,689.88.

In similar fashion Invicta41 was offshored.

Samarkand and Follower—Notices

Each of Trojan and Invicta41 were among a number of partnerships which were film finance schemes, promoted and administered by Ingenious Media Plc (“IMIL”) and Invicta Capital Ltd (“ICL”) respectively, as part of marketed tax avoidance schemes.

There were many such arrangements and partnerships, and they were similar to those considered by the courts in respect of other film partnerships. The time came when in Samarkand, Proteus v HMRC [2017] STC 926, [2017] EWCA Civ 77 the Court of Appeal decided that arrangements similar to those in this case were not entitled to film trading tax relief. The effect of the decision in Samarkand was that any partnership losses were to be treated as non-trading losses. Non-trading losses have different tax consequences from trading losses: in particular, partners are in general entitled to sideways loss relief only in respect of partnership trading losses. It is not in dispute in these proceedings that the two partnerships here are in a materially similar position to the Samarkand and Proteus partnerships, and it is not contended that the decision in Samarkand was wrong.

The claimant taxpayer accepts that in these circumstances it was in principle open to HMRC to take steps to amend the Partnerships' historical tax returns, to reflect this position and “amend out” the claimed sideways relief against personal income (pursuant to ss. 380, 381 of the Income and Corporation Tax Act 1988 (“ ICTA 1988”)). HMRC say they have successfully achieved that position under s.28B(1B) TMA 1970. Mr Rokos argues that they cannot show they did. He says that HMRC did not have the statutory power to do so, because enquiries were never validly opened into the relevant Partnership Returns in the first place, due to a failure properly to notify such enquiries in accordance with the requirements in section 12AC TMA 1970. The effect of this is that the personal returns retain the benefit of the partnership losses because, if there had been no initial enquiry opened, it was not possible for the amendment mechanism to operate in order to deny relief. A valid amendment would be carried across to the partners' own returns: ss. 12ABA(3), 28B(4) TMA 1970; Mr Rokos' personal tax returns for 2005/06 and 2006/07 had reflected his share of the Partnerships' losses for those years.

HMRC say that there was notification to the partners of the intention to enquire into the partnership returns that complied with the statute because there was notification to the agents of each of the partnerships, and those agents had authority to receive such notice. Further, in any event, there was indirect notification to this taxpayer, and/or the court can otherwise be confident that he did know/was notified according to statute of the intention to enquire within the appropriate time limit, given the manner in which HMRC interacted with these taxpayers in connection with their partnership returns.

Statutory Framework

There is no dispute as to the underlying taxation framework so that part of the statute whose meaning is under consideration, and the relevant mechanism, can be shortly set out.

Section 12AA TMA 1970 provides relevantly:

(1) Where a trade, profession or business is carried on by two or more persons in partnership, for the...