Ingenious fights back over £700m film fund HMRC ‘tax avoidance’ ruling

Under-fire creative industries investment specialists Ingenious has announced its intentions to appeal against a court decision, in their long running battle with HMRC.

The tax scheme set up Ingenious, which was used by high profile footballers such David Beckham and Wayne Rooney, (pictured below left) and a host of other UK TV celebrities has said it will appeal against a court judgement in its dispute with HM Revenue & Customs, which dates back as far as 2002.

Last week HMRC appeared to have the upper hand in the long-standing battle after investors in the film financing scheme lost a legal bid to overturn a £700m tax bill.

The scheme, which helped produce huge Hollywood productions, such as Avatar, Life of Pi and Die Hard 4, held investments from some of the UK and world’s best-known celebrities such as Beckham, Rooney, Ant & Dec, Sir Bob Geldof and Gary Lineker.

They were among 1,400 people who had at least £100,000 each tied up in the scheme, which HMRC said was a means of avoiding tax.

In response, Ingenious has said the judge was actually just simply clarifying a technical point from the original decision from last year and refutes the “tax avoidance” tag that it says is incorrect.

It added that it would now be taking HMRC to court again to challenge the court decisions.

‘Misleading’

Ingenious has hit out today, at what is called “misleading press articles” as it confirms its intention to appeal to the Upper Tribunal after Judge concluded First Tier proceedings with “misgivings and reluctance”.

Ingenious outlined its timetable for appeal process in a statement and clarifies the meaning of a recent “supplementary decision” following recent misleading media reports

The supplementary decision handed down by Judge Charles Hellier in which he clarified a technical point from his original August 2016 judgment.  In this clarification, the judge ruled “with misgivings and reluctance” that the film production costs were capital costs and therefore not tax deductible.

Ingenious chief executive Neil Forster said: “The Tribunal’s clarification of a technical matter has been presented in the media in a wholly-biased manner which misrepresents the facts and misleads the reader.

‘Strongly disagree’

“We strongly disagree with the Tribunal’s clarification and find it wholly unsatisfactory that the Tribunal reached this decision with “misgivings and reluctance”. We will be appealing the entire decision of the Tribunal.

“This follows a recent successful appeal brought by Ingenious against HMRC which led to the judges of the Supreme Court unanimously ruling in favour of Ingenious that HMRC had acted unlawfully in a briefing to the press.”

Ingenious is going to appeal the First Tier Tax Tribunal judgement as they consider it is “fundamentally flawed”. However, no appeal has yet been made.

The company said that it is angry that some press reports have referred to a ‘failed bid’ by Ingenious to overturn the August 2016 Tribunal decision. In fact, it states, this latest development was triggered after the Tribunal, having found in favour of the Ingenious partnerships on the Tribunal’s basis of assessment, instructed the parties to agree a common approach in applying the judgement.

Appeal ‘likely in 2018’

Ingenious believes this further decision “compounds the errors” made by the First-tier Tax Tribunal and reinforces the need to take this matter to a higher court. The appeal to the Upper Tribunal is likely to be heard during 2018 and Ingenious says that it is confident of victory.

This clarification from the First Tier Tax Tribunal does not change the original ruling, it clarifies how it is to be implemented.

The statement added: “In non-tax speak, this means that they were bona fide commercial businesses and not, as certain press articles have repeatedly suggested, “tax avoidance schemes”.  This is wholly unsurprising to Ingenious given that a number of the partnerships’ films are profitable, the partnerships have generated in excess of £1bn of taxable income and they have supported the production of some of the biggest films of all time, such as Avatar and Life of Pi.”

“HMRC has repeatedly attempted to paint the Ingenious film partnerships as being nothing more than tax avoidance vehicles, no different from many others that have failed before the courts. This ignores the fact that the judge has ruled they are trading businesses and are fundamentally different.

“To our knowledge, the August 2016 ruling in respect of the Ingenious film partnerships is the first time in recent memory that a tax tribunal has ruled in favour of a “film scheme”,” the statement concluded.

ABOUT THE AUTHOR
Gary Robinson
Deputy Editor, International Investment and Head of Video at Open Door Media Publishing. A fully qualified journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as an IFA.

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