As per Variety, the Ingenious Group, which ran a film investment firm which was backed by huge entertainment industry figures such as David Beckham, Sacha Baron-Cohen and “Harry Potter” producer David Hayman, has won a £700 million ($975 million) appeal against Her Majesty’s Revenue and Customs (HMRC).
In early 2000s when something called “sideways loss relief” was still permitted which enabled top rate earners, who would otherwise be taxed 40% on the top chunk of their incomes, to offset their potential tax bill against losses they made in other areas of business, so Ingenious therefore created film finance partnership schemes – which funded some of the world’s most successful films, including “Avatar” and “Life of Pi” – but any losses that the schemes made could be used to significantly offset investors’ tax bills, as per Variety.
So HMRC filed a case claiming that the schemes artificially invented losses on profitable films and amounted to “tax avoidance.” The schemes “sought to use artificial losses arising from investments to avoid £568m of tax,” HMRC said in one press release from 2016. “The Ingenious scheme tried to use artificial losses arising from investments in a range of films, including the blockbusters ‘Avatar,’ ‘Life of Pi’ and ‘Die Hard 4.’”
Ingenious won the case, however, if lost that could potentially have cost Ingenious up to £700 million ($975 million) taking into account interest, has been running since 2014.
Ingenious also lost three senior staff in the same year: chief executive James Clayton, media division managing director Nik Bower and investment director Michael Shyjka, although a spokesperson for the company said at the time: “None of our recent departures have anything to do with the [HMRC] hearing whatsoever. The timing of their departure is pure coincidence.”
Though Ingenious after going on to lose a 2016 judgment and 2019 judgment in the lower courts, the Court of Appeal this week found in favour of Ingenious, declaring that the partnerships were trading with a view to profit (and therefore did not amount to tax avoidance). The court also ordered HMRC to pay Ingenious’s costs and barred them from appealing to the Supreme Court.
“We are very pleased that the Court of Appeal reversed the findings of the Upper Tier Tribunal and ruled that our film partnerships were, as we have always contended, trading with a view to profit,” said a spokesperson for Ingenious. “In light of this judgment, we are considering what further options are open to us in relation to these proceedings.”
Ingenious continue to operate a film finance fund, funding around 30 films a year. Recent hits have included “Judy,” for which Renee Zellweger won an Academy Award, and “Unhinged” with Russell Crowe.