Geldof and soccer stars lose again in film investment case

UK tax tribunal confirms no tax relief allowable on Ingenious investment losses

 

Irish businessman Bob Geldof and a number of high-profile Irish soccer stars face a bill for their share of £700 million the UK revenue says it is owed after winning the latest legal battle over a failed film investment scheme.

Film finance firm Ingenious Media attracted about 1,400 investors, many of them high-profile sports stars, with the promise of profits as well as tax breaks by supporting British-made films such as Avatar and Life of Pi.

Retired Ireland international captain Robbie Keane and the team’s manager, Martin O’Neill, are among those who invested in the scheme, as are current international John O’Shea as well as former stars Clinton Morrison, Denis Irwin and David O’Leary.

The celebrities invested a minimum of £100,000 in one-off lump sums and the cash was used to finance up to 66 films from 2003 onwards. Any losses on such investments were used to offset tax owed by other income earned by the investors, such as footballers’ wages.

However, Her Majesty’s Revenue & Customs (HMRC) argued such schemes were not legitimate investments but a means of avoiding tax, and last August, in a 342-page judgment, a tax tribunal ruled that investors should receive tax relief on only 30 per cent not 100 per cent of their investment.

Capital costs

The two sides failed to agree on the terms of the ruling, with HMRC believing it meant the production costs associated with making the films were capital costs, and thus the investors were not due any tax relief on this either.

Ingenious said it “strongly disputed this interpretation on the basis that it was completely at odds with the whole thrust of a very lengthy and closely argued judgment”.

In a new ruling on Thursday clarifying the original decision, tribunal judge Charles Hellier has agreed none of the tax deductions was allowable.

He admitted “misgivings and reluctance” over the decision, adding: “We have not found this an easy decision, and are comforted by the fact that others have had similar difficulties with the concept of capital.”

A spokesperson for the UK tax authorities said: “We are pleased that the tribunal has agreed with us that the vast majority of what was claimed in tax relief by Ingenious investors was simply not due.”

Ingenious, whose investors also include Gary Lineker, David Beckham, Steven Gerrard, Wayne Rooney, and Ant and Dec, says it will contest ruling

“We strongly disagree with the tribunal’s clarification of a technical matter from its summer 2016 ruling,” a spokesperson said. “It is wholly unsatisfactory that the tribunal reached this decision with ‘misgivings and reluctance’. We will be appealing the entire decision of the tribunal.”

Ingenious said most of the disputed tax bills had already been paid by investors but would be reclaimed from HMRC if the financing firm won its appeal. Some £420 million of tax was avoided, but with interest included the total owed will be closer to £700 million. – (Additional reporting, Guardian service 2017)