Ingenious Media is to appeal the decision issued in August 2016 over film and investment partnerships and disputed tax and interest amounting to approximately £1bn.

The case centres around the disputed £1bn of tax and interest, which HMRC was trying to reclaim from members of  Inside Track Productions LLP and Ingenious Film Partners 2 LLP and ingenious Games over a series of film and video game investment schemes, which the tax authority asserts is avoidance [Ingenious Games LLP, Inside Track Productions LLP, Ingenious Film Partners 2 LLP v Commissioners for her Majesty’s Revenue & Customs Appeal numbers: TC/2012/6581; 2013/118; 2013/122].

In the original case, it was heard the Ingenious partnerships sought to use artificial losses arising from investments in a range of movies, including the blockbusters Avatar, Life of Pi and Die Hard 4. The video games element of the case was ruled as not trading with a view to profit, although this involved a much smaller claim centering around some £35m in disputed tax.

However, in that case, it was decided the Ingenious film partnerships and Inside Track Productions were trading with a view to profit, something that was reiterated in the latest ruling.

‘The LLPs were marketed as five year vehicles and that generally the vast majority of the income from the relevant agreements arose in the first five years. But it was also the case that the LLPs hoped that they had chosen at least some films which would be real successes. For those films income would continue to come in for many more than five years.’

‘It is true that the LLPs may have been able to assign the benefit of the contracts after five years or even earlier, but there was no indication that 10 this was the nature of the business being conducted,’

However, the judge ruled that the ‘rights were capital in nature’ and found ‘that the impairment amounts (or onerous contract provisions), which related to the capital expenditure on the rights, were not allowable deductions.

Ruling Judge Charles Hellier said: ‘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… To the eye of an accountant practising in the last 40 years the idea that profit should be struck without taking account of the depreciation of capital assets is absurd.’

Ingenious Media said in a statement: ‘We strongly disagree with the tribunal's clarification of a technical matter from its summer 2016 ruling. It is wholly unsatisfactory that the Tribunal reached this decision with "misgivings and reluctance”. We will be appealing the entire decision of the Tribunal.’

HMRC said in a statement: '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. Anyone who anticipates problems paying their tax bill should contact HMRC, who may be able to offer extra time to pay based on individual circumstances. HMRC has an outstanding record for supporting those facing genuine difficulty.'

The ruling clarification can be read here.