Legal
HMRC Wins Blockbuster Tax Avoidance Cases
The UK tax authority has claimed victory in a long-running court case relating to a series of major film and video game investment schemes.
HM Revenue and Customs has won two tax avoidance battles against the Ingenious Film Partnership and Icebreaker avoidance schemes in cases worth more than £820 million ($1.079 billion) in tax owed and interest. The legal tussles highlight how tax authorities are seeking to crack down on forms of artificial tax avoidance.
HMRC said both schemes saw users claim more in tax relief than they had invested.
The Ingenious scheme tried to use artificial losses from investments in movies, including Avatar, Life of Pi and Die Hard 4. Members of the scheme claimed to have financed 100 per cent of the cost of producing films and games. The bulk of the cost was written off within a year, giving the partners large losses which were set against other income. HMRC noted, however, that partners only funded 30 per cent of the cost - the remainder was routed through the partnership on paper only.
Nearly four years ago, those involved with the Ingenious scheme were given the opportunity to settle on similar terms, HMRC said. They now face big bills for interest and legal fees on top of the £434 million in unpaid tax resulting from the scheme.
Meanwhile, the Icebreaker scheme tried to create artificial losses from investments in limited liability partnerships. Members of the scheme claimed tax relief on losses many times higher than the actual amount they invested in the partnerships.
“These were some of the biggest films of all time, and the schemes involved people claiming far more in tax than they invested in the first place,” said Jennie Granger, director general of enforcement and compliance at HMRC.
“We always say that if something is too good to be true then it probably is. And in this case the long legal battle will mean that investors face even bigger bills for interest and legal costs.”
Click here to read about a prominent case last year around another film scheme carrying tax avoidance advantages.
