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HMRC’s ‘tax avoidance’ ruling on Ingenious film financing scheme

HMRC adopts a tough line on tax avoidance schemes.  This recent case before the Upper Tribunal (UT) highlights how HMRC once again has had a successful win in the tax tribunals against the Ingenious film tax avoidance scheme.

The Upper Tribunal (UT) has upheld the First-Tier Tribunal August 2016 decision to deny tax relief for more than 1,000 people who had invested in the Ingenious film financing schemes in the hope that this would secure them tax relief against their own tax liabilities. The UT judge has ruled that the film production costs were capital costs and therefore not tax deductible.

 HM Revenue & Customs (HMRC) has consistently argued that the vast majority of what was claimed in tax relief by Ingenious investors was simply not due, given the tax relief claimed on losses was many times higher than the amount actually invested in the film financing schemes by the investor. HMRC considers some £420m of tax was avoided. With interest the total amount owed will be closer to £700m.

A spokesman for Ingenious has indicated that it would be appealing the ruling. A number of high-profile celebrities are believed to have invested in the Ingenious film financing schemes.

This UT decision is the latest of a number of successful wins by HMRC in the tax tribunals against tax avoidance schemes.

HMRC adopts a tough line on schemes, some often highly contrived, which they consider were designed to gain investors a tax advantage never intended by Parliament.

Investors in such schemes, some who have received Accelerated Payment Notices demanding payment of the tax advantage being gained, should take specialist advice to determine if it is in their best interests to litigate for the tax relief being claimed and denied by HMRC or approach HMRC to seek settlement.

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