Film partnership firm Ingenious has hit back at HMRC for deliberately confusing the scheme with proven tax avoidance schemes.
Ingenious chief executive Neil Forster has accused HMRC of making assertions that are factually wrong and for incorrectly linking it to tax avoidance scheme Icebreaker.
The comments come after both HM Revenue and Customs and Ingenious film partnerships claimed to have won the First Tier tax tribunal decision over whether Ingenious is deemed a tax avoidance scheme.
Forster says: HMRC appears to be deliberately confusing the Ingenious case with proven tax avoidance schemes and making assertions which are factually wrong.
We are disappointed that the Tribunal has restricted tax relief on the costs of the films however believe that investors are better off as a result of this judgement than if they had accepted HMRC offer to settle four years ago, and considerably better off than the position HMRC attempted to argue for some years before the Tribunal which would have seen them receive no tax relief on their investment.â€
The hearing involved Ingenious subsidiaries Inside Track Productions, Ingenious Film Partners 2 and Ingenious Games, withÂ Ingenious scheme members claiming to have financed 100 per cent of the cost of producing films and games.
However, HMRC claimed the majority of the cost was written off in the first year, giving the partners large losses that were set against other income. It alleged only 30 per cent of the cost was funded by partners cash and the other 70 per cent was put through the partnership on paper only.
In its decision, the tribunal dismissed the appeals of Ingenious Games and allowed in part the appeals of Ingenious Film Partners 2 and Inside Track productions.
It found that all three subsidiaries were trading to make a profit. It found that Inside Track incurred only 35 per cent of the cost of production and Ingenious Film Partners 2 and Ingenious Games incurred 30 per cent of the budgeted cost of each film and game.
The tribunal also ruled the subsidiaries losses were not calculated in line with generally accepted accounting practice.
Reports claim investors now face large bills for interest and legal fees as well as Â£434m in unpaid tax, but Forster says all legal costs have been paid for by Ingenious.
We remain disappointed that the Tribunal decided to award film investors only partial loss relief and to restrict all loss relief for games investors. We are actively reviewing the judgement and considering an appeal to seek the maximum redress for our investors, says Forster.
Forster adds that investors in the scheme received no more tax relief than the cash they invested.