Having just returned from visiting the Harry Potter rides at Universal studios I was intrigued to notice that RBS had been revealed to have used the kind of magic worthy of a graduate of Hogwarts School of Witchcraft and Wizardry. The Royal Bank of Scotland Group conjured up at least £1 billion in tax breaks by investing in what are now controversial financing deals for Harry Potter films and a host of other blockbuster titles that involved no risk to the bank.
The transactions, which RBS has never disclosed, are revealed in hundreds of public filings by at least 25 companies set up by the bank to take part in movie “sale and leaseback” arrangements a decade ago. Those companies are still active and earning income for RBS, though they’ve been shifted to a division that houses unwanted assets for the remaining lifespan of the 15 to 20-year original leases. The filings show that RBS owns rights to the third and fourth Harry Potter films, Troy, Batman Begins, Charlie and the Chocolate Factory, and at least 20 other movies, though the film titles aren’t always listed in the available paperwork.
From 1998 until around 2007, RBS took advantage of the tax breaks without paying any production costs, or risking losses if the movies bombed. At least 10 of the transactions have been probed by the UK tax collection agency, according to company records.
Between 2003 and 2006, RBS avoided or delayed paying about £1 billion in tax using the deals, according to calculations based on public filings and historic tax rates.
That doesn’t necessarily mean they were illegal, the leases complied with rules in force at the time, and that when the law changed in 2007.
In 1997, the UK government introduced generous tax credits for companies involved in the booming film industry. Among the investments that emerged to take advantage of the rules were sale and leaseback deals. Lawmakers later found the deals, while legal, benefited those seeking to avoid taxes more than they helped British filmmakers. The rules were tightened in 2007, and the revenue office began examining old cases and sending out tax bills to thousands of investors, resulting in at least a dozen court cases over arcane points of tax law.
And for RBS, they’ve been particularly beneficial: The Bank offset its corporate taxes in past years using the schemes and the bank hasn’t paid corporate taxes in recent years because it hasn’t had any profits since 2008 when it got a £45 billion government bailout after coming close to collapse.
Another win – win for RBS …my prediction…..it’s going to be a BLOCKBUSTER.