In an appeal that could cost HM Revenue and Customs up to £1 billion, Ingenious Media plans to launch an appeal against the tax man over a controversial film industry tax relief scheme. Promising tax relief and a reduced tax bill, celebrities were persuaded by Ingenious Media into a film partnership scheme that have since proven very controversial. Numerous sports stars, celebrities and wealthy individuals have been caught up in the furore surrounding various film industry tax relief scandals. To name a few, David Beckham, Jeremy Paxman and TV favourites Ant and Dec invested money in the schemes devised by ingenious media. With an unquestioned reputation, the stars felt Ingenious Media to be worthwhile investment, since the company has funded more than sixty films including Avatar and Brooklyn.
The appeal from Ingenious Media comes after a tribunal upheld HMRC’s charges against the company, finding that investments from individuals into its tax relief scheme did not warrant tax relief. Described by a former HMRC boss as “scams for scumbags,” the government agency has argued that rather than a genuine and legitimate investment scheme, the whole enterprise was structured for the purposes of tax avoidance. As a result, HMRC is refusing to grant tax relief and demanding payment of outstanding taxes with interest. The case represents one of the biggest financial challenges to HMRC, with investors claiming around £620 million worth of tax relief. Combined with interest, this means that the best part of £1 billion is at stake, if HMRC lose the case.
The Limited Liability Partnerships were launched around ten years ago and were able to acquire millions of pounds in investment. Household names, high-flying City workers, entrepreneurs and business elites were attracted by the tax relief scheme. However, originally marketed as tax efficient, HMRC turned around and issued investors with huge tax bills, arguing that the investments did not warrant tax relief.