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HMRC urged to soften stance on film partnership schemes

Andrew Tyrie Tory conf 2013.jpg

The chair of the influential Treasury select committee has criticised HM Revenue and Customs for its handling of legal disputes against film partnership tax avoidance schemes, saying they have led to “very severe” financial distress for some investors.

In a letter to HMRC, select committee chair Andrew Tyrie says he was made aware that the investigations into some of the cases were “not always fair” and the outcomes were unexpected.

Tyrie says: “This has resulted in financial calamity for some of those involved and considerable difficulties for HMRC in bringing a large number of schemes to a close. Many have said that, when these schemes were being sold, they were not considered to be aggressive avoidance but just a deferral of tax, and they were often marketed as routine tax management.

“Whether or not these claims are valid, it does appear that many individuals are facing very severe financial distress as a consequence.”

He says: “I have also heard various individuals’ complaints, which may or may not be justified, about HMRC’ s approach. For example, I have been told that a number of firms and individuals have made suggestions to HMRC for what they consider to be an equitable and pragmatic way of bringing the matter to a conclusion after several years, and that these suggestions have been rejected.”

Tyrie says he wants the issue of “dry income” – which sees people who were denied relief from their costs continuing to be taxes on income that they never benefit from – explained.

He adds: “I would be grateful if you would set out clearly how these matters are being addressed within HMRC and what is being done to ensure that any egregious schemes are not causing other less offensive tax planning arrangements to be caught up in very long running enquiries. The outcome of the court case would also suggest that there is a gap in how partnerships are treated.”

According to the BBC, HMRC responded that it works hard to tackle abuse in the system, ensuring fair and sensitive enforcement.



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There are 10 comments at the moment, we would love to hear your opinion too.

  1. Once again the ‘Poor’ wealthy Boo Hoo-ing to the Political Influencers.
    When will these ‘Poor’ wealthy people realise that, when a tax scheme seems too good to be true, it probably is!!
    Its also worth mentioning the rapid inclusion this tax season (2016/17) of film funding within the Governments Seed Enterprise and Enterprise Investment Schemes, ‘BUYER BEWARE’.

  2. Guilty until proven innocent without the option of trial or fair treatment is hardly boo hoo-ing.

    You’ll probably find that the majority of the people caught up in these schemes are not your super rich and wealthy, but moderate earners looking at alternative tax arrangements, but the press like to leverage the mob mentality on the big names.

    There are plenty of examples out there of schemes that are in excess of 10yrs old that HMRC are not willing to engage on once they have issued their APNs and have taken all the money & possessions they can.

    Suicides, divorces and broken families are all been evidenced in HMRCs behaviour and yet it falls on deaf ears and sadly because no laws have been broken by the individual, the Human Rights Act can’t be invoked, so HMRC have no accountable body to control them

  3. If they were too greedy, or too stupid not to look at these type of investments in any detail and go on to blame the advisors or promoters of these types of products then tough luck! It appears that, as usual nobody is willing to admit their own mistakes and take the consequences of their own actions in what can only be described as completely fraudulent schemes designed to enrich the scheme creators, promotors and advisors, and definitely NOT the investors! Caveat Emptor!

  4. Did you hear what Mike said? Suicideds, divorces and broken families. And guilty until proven innocent. HMRC have behaved despicably. Sure, the footballers et al are the wealthy lot but this is also impacting ‘jo blogs’ middle income earner who was told these were safe bets, by QC’s etc. Then HMRC shift the goal posts and attack. And they have done it in a very nasty way, eg sending out (very aggressive) letters on a Friday night to ruin your weekend…

  5. People clearly aren’t reading the article without inserting assumptions.

    The article isn’t about the schemes, its about HMRCs ability to resolve the matters with consistency and in a fair manner. In the event of those schemes being found to be liable for tax by FTT or other court sessions, the investors are holding their hands up and saying that they’ll pay the tax. However, they are being given between 30-90 days to pay up everything, including interest and penalties.

    From the evidence i’ve seen, the investors are generally not offered a flexible Time to Pay (TTP) repayment plan and HMRC are not seeking to make individuals insolvent or bankrupt through the courts if there are assets to take, these commonly include family homes, which runs contrary to the messages they spew out in the media about no families are affected by their actions.

  6. “…when these schemes were being sold, they were not considered to be aggressive avoidance but just a deferral of tax, and they were often marketed as routine tax management…” – is that what HMRC told the punters who signed up? If not, why should HMRC be held to account for the marketing spiel of the scheme promoters?

    As Lord Greene observed in the Howard de Walden tax avoidance case: “It scarcely lies in the mouth of the taxpayer, who plays with fire, to complain of burnt fingers”.

  7. HMRC have disgraced over the Film
    They have challenged and won cases against abusive scheme then lumped all partnership into the same basket and gone for the throat.

    They have sent out offers to settle only you close the department weeks later.

    They have taken 5 years to respond to question from partnerships legal council.

    Imagine always driving at 3 mph below the speed limit. Then in you get a letter giving you 90 days to surrender your driving licence for life and pay £500,000 in penalties and interest because the speed limited was retrospective reduced by 10 mph.

    Welcome to being a partner in a film partnership!

  8. I am an investor in one of these schemes. I used to work in the financial markets, so I am experienced in this area, and I went through the documentation carefully before investing – it included a formal opinion from a QC that the scheme was legitimate. I didn’t consider it playing with fire – the government had recently introduced tax incentives to encourage investment in the film industry, so I did so. The main bone of contention has been the treatment of gearing – film partnerships borrowed money to increase their investments (and the associated tax relief), and HMRC has objected to relief claimed in this way. But the money was all invested, and if the relief wasn’t due to the equity investors then it should have been due to the banks who provided that element of the funding. (This would have made no difference to HMRC’s tax take, but it never crossed the banks’ minds that this could be their relief rather than ours.)

    I was in favour of fighting HMRC in court, but with the dispute now having run on for many years, a majority of the other partners were exhausted and just wanted the whole thing finished with. It was difficult to get contributions for the fight from partners who had died or moved overseas, or some who simply refused to pay up, so HMRC were in a strong position to achieve a shake-down. I consider that, under pressure to increase revenues after the 2008 financial crisis, HMRC have in recent years moved away from any attempt to calculate correct or reasonable figures, and are simply “tax farming” to squeeze the maximum they can out of taxpayers. It’ll be your turn next.

  9. […] some MPs have pushed back on the film financing affair – or at least the penalties imposed in light of […]

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