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HMRC wins blockbuster avoidance case

05 August 2016

HMRC wins two major tax avoidance battles against the Ingenious Film Partnership and Icebreaker avoidance schemes in case worth over £820m in tax owed and interest.

The Ingenious scheme tried to use artificial losses arising from investments in a range of movies, including the blockbusters Avatar, Life of Pi and Die Hard 4.

The Icebreaker scheme attempted to create artificial losses from investments in limited liability partnerships.

Users of the Ingenious scheme were given the opportunity to settle on similar terms nearly four years ago and now face big bills for interest and legal fees on top of the £434m in unpaid tax resulting from the scheme.

The Ingenious scheme members claimed to have financed 100% of the cost of producing films and games. The bulk of the cost was written off in year one, giving partners large losses, which were set against other income. But only 30% of the expenditure was actually funded from the partners’ cash, the other 70% was routed through the partnership on paper only.

The Icebreaker decision is HMRC’s second win against the scheme. It’s members claimed tax relief on losses many times higher than the actual amount they invested in the partnerships. The return on the partners ‘investment’ was the tax relief, which was considerably larger than their cash contribution.

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