A major tax investigation involving investments in movies like the Oscar winning The Queen is on hold following the arrest of a tax official.
Starring Helen Mirren in one of her best-loved roles, the film cost around £10 million to produce but raked in more than £40 million at the box office.
Dame Helen went on to win the best actress Oscar for her performance.
HM Revenue and Customs has had to put the inquiry on a back-burner after police launched their own investigation into the conduct of tax oficer David Duthie.
The arrest is believed not to relate to the Future Capital Partners investigation, but allegations relating to Duthie’s role in another case.
Evidence at risk
He was working on a £31 million tax inquiry involving Future Capital and two film partnerships.
The inquiry has been suspended pending the results of the police investigation.
HMRC fears the integrity of evidence gathering in the Future Capital case and several other prominent inquiries led by the team investigation team may be called into question before the courts.
Dulthie worked as a member of the 12-strong team from an HMRC office in Edinburgh.
The team has around 600 film cases worth hundreds of millions in disputed tax reliefs which HMRC may have to shelf or reinvestigate due to the arrest.
The Future Capital case involved tax reliefs claimed by two partnerships the firm set up to attract investment for films.
Ruling appealed
The partnerships bought the screen rights to films like The Queen, and leased them back to movie companies to claim tax relief.
In 2011, HMRC won a court case arguing the partnerships were not trading, so investors could not claim tax relief. Future Capital appealed the ruling and expected the hearing to go-ahead this month.
However, HMRC filed for adjournment at the end of April after the arrest.
An HMRC spokesman said: “Any allegations relating to improper conduct by an official are treated with the utmost seriousness and investigated fully. Legal constraints stop us discussing the case any further.”
Film financing has become controversial in recent years as many of celebrities and footballers were revealed as the principal investors behind the partnerships set up to mitigate tax.
One law firm tackling advice firms over the way investments were sold reckons to have 200 Premier League footballers and managers as clients who invested an average £300,000 each.
