On Friday morning a press release from Her Majesty’s Revenue and Customs (HMRC) wrongly and deliberately grouped the Ingenious judgement at the First Tier Tax Tribunal together with a proven tax avoidance scheme called Icebreaker leading to a number of misrepresentations in the media. Ingenious now finds itself compelled to set the record straight.

On Tuesday last week, the Tribunal ruled that Ingenious’s film partnerships were trading and that that trade was conducted with a view to profit. This vindicates Ingenious’ position which it has repeatedly stated over the last 10 years, that its film partnerships were bona fide businesses run for a commercial profit.

In contrast, the Upper Tribunal on Friday upheld the decision of the First Tier Tribunal that the Icebreaker scheme was not conducting a trade with a view to profit and as such was set up for the sole purpose of avoiding tax, drawing a clear distinction with the Ingenious case.

The HMRC release also contained a number of false assertions that have since been reported in the media. Whilst these may apply to the Icebreaker scheme, in the Ingenious case these are entirely false. Ingenious would like to make the following clarifications on the record:

1. The Ingenious investors received no more tax relief than the cash they invested. Furthermore, investors have incurred no legal costs in this fight, all of which have been paid for by Ingenious.

2. Although part of the tax relief on film costs has been disallowed, a corresponding proportion of film income will no longer be taxed. In the case of all our partnerships, this will result in less taxable income being brought into account than would otherwise have been the case.

3. As a result we believe investors are better off now than if they had accepted HMRC’s offer to settle four years ago, and considerably better off than the position HMRC had attempted to argue at the Tribunal which would have seen them receive no tax relief on their investment.

Neil Forster, Ingenious CEO, said:

HMRC appears to be deliberately confusing the Ingenious case with proven tax avoidance schemes and making assertions which are factually wrong.

The Ingenious investors received no more tax relief than the cash they invested. Furthermore, investors have incurred no legal costs in this fight, all of which have been paid for by Ingenious.

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’s 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.

It is important to note that as well as the restriction on loss relief the Tribunal also ruled that the tax on film income should be restricted, reducing the amount of tax payable by investors.

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.

We are very proud of our track record in supporting the UK film industry and look forward to the release of our latest feature film, A United Kingdom starring David Oyelowo and Rosamund Pike, which opens the London International Film Festival in October.

Neil Forster

CEO

Notes to editors:

1. Founded in 1998 by Patrick McKenna, Ingenious has produced and co-financed hundreds of feature films and more than 550 hours of television programming with partners including 20th Century Fox, Sony Pictures, NBC Universal, Warner Brothers, Paramount Pictures, Disney, Lionsgate, Film4, Pathé, the BBC, ITV and Endemol Shine.

2. Ingenious is a serial investor in the global creative economy, having raised and deployed more than £9 billion across the creative sector, as well as in real estate and infrastructure projects.