Ingenious hits back over ongoing tax case coverage
‘Misleading media reports’
Ingenious Film has hit out at “misleading” press reports on its ongoing tax court case and criticised HM Revenue & Customs (HMRC) for painting its partnerships “as nothing more than tax avoidance vehicles”.
The film production partnership firm has been in an ongoing court dispute with HM Revenue & Customs (HMRC) since 2002.
Ingenious’ latest statement followed the recent “supplementary decision” by the first-tier tribunal on the extent to which film production costs were capital and not tax deductible.
The tribunal ruled to reduce the proportion of the costs eligible for tax relief from 30% to around 4%, as it deemed this amount constituted ‘capital’ and not ‘revenue’.
Ingenious claimed this decision “clarified a technical point” on the tribunal’s previous ruling, in August 2016, that decided two of its three film subsidiaries investigated by HMRC were able to claim partial relief on costs.
It said both it and the HMRC had been looking to clarify the extent to which costs were capital and therefore not tax deductible, after the tribunal instructed parties to agree a “common approach” to applying the August judgment.
Ingenious added, however: “The decision was deliberately mischaracterised in press reports as a failed bid by Ingenious to overturn the August 2016 tribunal decision.
“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.”
It said the HMRC coverage ignored the tribunal judgment that Ingenious’s subsidiaries are trading businesses.
HMRC were not able to comment at the time.
‘Strongly Disagree’
Ingenious confirmed it would be appealing the August ruling as well as the first-tier tribunal’s most recent decision.
Ingenious chief executive Neil Forster (pictured) 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.
“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.”
Ingenious said it expected the appeal to be heard in the Upper Tribunal in 2018.
Background
HMRC first took an interest in Ingenious Film’s partnership investments in 2012 when it argued it was claiming ‘artificial losses’ on blockbuster films such as Avatar, Die Hard 4 and Life of Pi.
Instead of funding 100% of the costs of the films and games, as it said, HMRC claimed members had funded only about 30%, while 70% was funded on paper.
The film investors appealed against the charge, with the intention of proving they were trading with a view to profit, bringing the case to the first-tier tax tribunal.
HMRC argued investors were claiming tax relief on artificial losses and demanded immediate payment of the avoided tax. HMRC calculated the tax bill for the case was worth around £700m, made up of £420m in tax plus added interest.