Andrew Mitchell invested in company HMRC declared tax avoidance scheme
Andrew Mitchell, who was at the centre of the Plebgate affair, is said to have invested in a film scheme which HMRC considers a tax avoidance programme
Andrew Mitchell, a former cabinet minister, has been identified as having invested in a film finance company which has been declared as a tax avoidance scheme.
Mr Mitchell, who resigned over the ‘Plebgate affair’, is said to have invested in a company which financed films including X-Men: The Last Stand and Garfield.
The former chief whip invested money in Ingenious Film Partners 2, which was promoted as a vehicle to encourage people to invest in British film.
But according to HMRC it was actually designed to generate inappropriate tax relief for its investors.
The company appeared on a list this week issued by HMRC of 1,200 companies that may receive accelerated pay notices. These mean investors can be asked to repay all the tax HMRC has calculated they should have done within 90 days of receiving the notice and before the case reaches court.
Both Lord Waldegrave, the former chief secretary to the Treasury, and Lord Grade, the former chairman of the BBC are said to have invested, BBC Newsnight reported.
The scheme works by investors putting in a minimum of £36,000 which is then topped up to £100,000 with a loan from Ingenious Film Partners 2. This £100,000 stake is then used to buy shares in film productions, which created a £90,000 loss in the first year.
Top rate taxpayers could then choose to write the loss off against their taxes, and would get roughly the £36,000 they initially invested back in tax relief. They would also then still own the £100,000 stake.
HMRC has disputed that “expenses incurred in the course of their businesses related wholly and exclusively to the carrying on of any trade”.
Ingenious, the company that runs Ingenious Film Partners 2, said: “HMRC has failed to distinguish between commercial businesses and tax avoidance schemes and have, without proper consideration, deemed all film arrangements to be tax schemes.”
It said they were due to have a tax tribunal in November, at Ingenious’ request.
Mr Mitchell, Lord Waldegrave and Lord Grade may have reached a settlement with HMRC to pay the tax reliefs already, or may never have used such relief. They could also soon be facing a very large tax bill.
Mr Mitchell said in a statement: “When the last Labour government introduced tax incentives to invest in the British film industry, along with many other investors I did so through Ingenious Films. I resigned from Ingenious when I was in government and always pay all tax when due.”
Lord Grade also confirmed he was one of the original investors in the scheme. He said: The Labour government at the time promoted a policy to stimulate investment in the British film industry through tax incentives. The Ingenious Fund gave effect to this policy…”
Lord Waldegrave, MP for Bristol west from 1979 to 1997 said he never knew the scheme was a tax avoidance vehicle. He said: “It was presented as a genuine film investment partnership. I was told they’d financed Avatar and other films. It never occurred to me it was tax avoidance. The Revenue haven’t been in touch yet. If the Revenue contact me then I would pay it back.”
Ingenious has also invested through other vehicles in Avatar, Girl with a Pearl Earring and Hot Fuzz.
