The schemes allowed investors to claim tax relief on nearly the whole amount invested in the first year and have raised £5bn in the last 10 years for the film industry investing in films such as Avatar, X-Men Origins: Wolverine and Hot Fuzz.
The schemes have been a firm favourite for celebrity investors including sportsmen, television presenters, musicians and even members of the House of Lords such as Wayne Rooney, Steven Gerrard, Jeremy Paxman, Sir James Dyson and Anne Robinson.
It is believed that bankers have also invested in the schemes in order to avoid paying tax on their bonuses. One industrialist is believed to have invested £62m over the last 10 years.
HMRC are looking at the schemes from 2003/04 and 2005/06 as they believe they were set up chiefly for tax avoidance.
HMRC have allegedly sent tax demands to investors ranging from tens of thousands of pounds to more than £1m. They have stated if an investor has not received a tax demand yet, that is not to say that they should not expect one.
However, Ingenious Media are denying that the schemes are aimed at tax avoidance and are not allowed:-
“HMRC have made the same error in all the film productions we manage.
An HMRC inquiry is a routine occurrence. Out partnerships have always been found to have been operated in a proper manner. We have never had an HMRC inquiry go against us.”
However, investors have been warned by Ingenious Media’s lawyers that previous pledges from HRMC that the film schemes complied with tax rules may count for nothing.
Ingenious Media claimed that before the 2005/06 scheme was set up, they discussed the loans to investors with HMRC and had written confirmation from HMRC that everything complied with tax regulations.
However, it seems that HMRC have now changed their minds.
Ingenious Media, meanwhile, have told investors that they believe there is no issue here.
HMRC believe that the film schemes breach rules laid down by Gordon Brown when he was chancellor.
Brown laid the rules to try to boost the film industry by allowing investors tax reliefs for backing the film industry. This was aimed at film-makers or those with a genuine interest in the film industry.
Such rules have since been outlawed.
However, it has to be an almost impossible job for HMRC to prove that anyone doesn’t have a ‘genuine interest’ in the film industry.
HMRC believe that the ‘partnership was not trading on a commercial basis and so [partners] have underpaid tax’.
A spokesman for HMRC has said:-
“If we find evidence of abuse we will take steps to put things right.
The loopholes which allowed the tax relief to be abused with no benefit to the film industry have been closed.”
A spokesman for Ingenious Media however has stated:-
“We are not in the business of generating tax schemes. It is standard practice for HMRC to enquire into schemes where tax relief has been claimed on losses. We welcome this enquiry.”
Vantis, a tax specialist firm alleged to be having problems financially due to its commitments as a joint liquidator to Stanford International Bank (SIB) and, according to some sources, have fallen into the red by some £10.7m and their shares quoted at 90p in May last year now trade at 23.1p, have in the past advised clients to invest in the Ingenious Media film investment schemes.
Vantis confirmed it did suggest film investments to clients as part of the broader tax planning landscape. It added:-
“This type of work is highly regulated by the Financial Services Authority with which we comply and, as such, we provide clients with comprehensive information on where their capital is invested, both before they invest and on an ongoing basis”.