For over a decade, thousands of wealthy individuals – including pop stars, TV personalities, sporting legends and politicians – have claimed tax relief for investments made into film schemes.
Whilst there has been a benefit to the UK film and TV industry, HMRC has challenged several schemes that it argues took taxational advantage of the system. Its subsequent demands for repayment of owed tax on film partnership investments have left many investors facing severe financial difficulties and even bankruptcy.
Needless to say, when it comes to their accountant advisors, the stakes are high.
Leonard Curtis Business Solutions Group (LCBSG) – providers of the Lifecycle accountancy support network – works with many of these high-net-worth individuals and their advisors to make their even bigger tax bills manageable.
Setting the scene for film tax relief
In the ten years since these reliefs were introduced, the British Film Institute has reportedly certified 2000 films in a sector that employs over 60,000 – with HMRC allowing £2.3 billion in film tax relief. Amongst the most successful beneficiaries are recent instalments in the James Bond, Star Wars, Harry Potter and Batman franchises as well as a number of Disney productions. Between them, they’ve generated more than £750 million at the UK box office.
Add to this the £7.7 billion that the sector contributed to the UK economy in 2016 – an increase in 80% on the figure only five years earlier – and it’s easy to see the importance it has when it comes to producing films and high-end TV.
HMRC and the role its playing to stamp out tax avoidance
The picture painted appears positive, yet HMRC argues that some film tax relief schemes are, in fact, a form of avoidance. It’s now challenging those production companies and investors that it believes to have exploited the tax breaks that were designed to support the UK film industry.
One of the most recent and most renowned cases – due to the high-net-worth and celebrity investors linked to it – is the £700 million scheme run by Ingenious Media.
With a total reported tax bill of £480 million, 122 of its investors recently looked to sue their advisers over investment losses. They also appealed against the High Court judgement on the lawfulness of accelerated payment notices (APNs) and partner payment notices (PPNs) that have been issued against them by HMRC.
The case has also been appealed in the Upper Tribunal and is likely to be heard later this year. If Ingenious is successful, HMRC’s APNs will be revoked.
The supporting role that LCBSG can play if faced with an APN – Corporate Strategies
Since their introduction in 2014, APNs have raised more than £3 billion. However, one in five cases is not founded on a legitimate basis. This equates to 12,800 of the 64,000 APNs that HMRC will issue this year being either incorrect or negotiable to an affordable, achievable settlement. It’s important to remember that whilst this is a complicated, uncertain and ever-changing landscape, clients do still have options.
Part of LCBSG, Corporate Strategies (CS) is a specialist in corporate APN settlements and Time-to-Pay arrangements. Every day, its expert team works with HMRC to negotiate affordable, achievable repayment terms for clients in arrears.
As soon as CS becomes involved, HMRC puts on hold all threatened action. Requests for extensions to prepare repayment proposals are usually granted. The team’s 2017 success rate speaks for itself. All three corporate APNs submitted – at a total value of £2.6 million – were agreed, each with a 24-month repayment period.
And of the 59 time-to-pay proposals put forward, 95% – or 56 cases – were approved by HMRC. This resulted in the repayment of almost £9 million in tax liabilities over an average twelve-month period and the safeguarding of around 2,000 jobs.
And the role played by LC Advisory
If clients are unable to pay the tax due – or if the additional tax liability combined with other commitments places the client in a precarious financial position – it’s essential that specialist advice is swiftly sought before the issues escalate.
Retaining control of the situation is key if a positive outcome is going to be achieved. Access to specialist knowledge and experience of these situations significantly increases the likelihood of a successful resolution – as well as ensuring that the client-accountant relationship continues.
LC Advisory – another division of LCBSG – provides this essential, concise advice on specialist issues, whilst enhancing the accountant’s client service capabilities.
Every day, the LC Advisory team helps make complicated, stressful financial situations manageable – providing accountants with the expertise and support to help their clients take control of their financial distress and implement a plan to resolve it.
As with CS, LC Advisory has a thorough understanding of HMRC protocols and swiftly and effectively develops structured deals in line with HMRC’s requirements. There are often limited solutions for financial distress and it is important that a bespoke action plan is developed to meet each client’s situation.
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