Ingenious Films – APNs and PPNs expected over Christmas

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Posted in:Banking and Finance, Business Finance|December 23, 2015 | Join the mailing list

As previously commented, HMRC’s policy of tackling tax avoidance was given a considerable practical boost in 2014 when the accelerated payment rules became law.  There are two principal forms – the accelerated payment notice
(“APNs”) and the partner payment notice (“PPNs”).

Since August 2014 HMRC has issued tens of thousands of APNs and PPNs.  In the first twelve months it reported an additional increase of £1 billion in the sums it has recovered.  Indeed, so important is this work to HM Treasury
that the “tax gap” is now a regular inclusion in the Chancellor’s reporting to the country, including recently in the autumn statement.

HMRC is currently sending out the next tranche of APNs and PPNs and berg expect those to be received by taxpayers before and during Christmas 2015.  The notices can relate to a vast range of schemes and tax avoidance, including
whether a restaurant run by college students as part of their tutoring is exempt from VAT as an educational establishment[1] (no), whether a test drive car for dealerships is exempt as part of a specific scheme[2] (no) and, in greater numbers, whether the
multiple Ingenious Partnership film schemes are acceptable under tax laws.    Ingenious Films is simply one of many schemes that utilised – or at least tried to utilise – the tax relief offered in order to stimulate and increase the number of films made and
produced in the UK.  Ingenious has been sold to a lot of people as a means of limiting their tax liabilities. Most schemes have now been found to be unlawful tax avoidance schemes utilising synthetic steps for the principal aim of creating a loss to allow
for a tax set-off.

The Ingenious Films issue is significant because it impacts upon the tax liabilities of a very wide range of individuals from those earning £50,000 a year right through to the footballers and actors/singers who earn £250,000
a week.  These schemes have been utilised by many.

A PPN is the same as an APN, but it applies to a member of a limited liability partnership rather than the individual themselves; the ultimate outcome is no different.

Some individuals impacted by HMRC’s decision to issue APNs and PPNs in respect of Ingenious Films’ schemes issued a judicial review against the use of APNs and PPNs, with 154 individuals being a party to the judicial review.

The judicial review was heard at the High Court and was unsuccessful[3].  Leave was granted in December 2015 by the Court of Appeal to appeal the High Court’s decision.

The Judicial Review looked at and considered whether the use of APNs and PPNs was lawful, achieved natural justice, whether the issuance of them was irrational and whether they impacted the human rights of those receiving
them.  The High Court rejected each of the claims.

Dunne v HMRC is an almost identically argued case that is currently awaiting a hearing at the High Court[4].  It is therefore possible
that the applicants in this second judicial review may amend (or seek to amend) the manner in which they will argue their case based upon the outcome of the Rowe judicial review.  The decision on Rowe, already subject to appeal, should only be considered in
terms of new hearings being able to change its findings.

If you have been sold a tax avoidance scheme and have now received – or expect shortly to receive – either an Accelerated Payment Notice or a Partners Payment Notice – and wish to consider the legal implications of the sale
of the scheme to you, please contact a member of our banking & finance litigation team.

Please speak to us if you are part of any of the following tax schemes:-
Ingenious film tax avoidance scheme, a Disney Movies film tax avoidance scheme, interest relief tax avoidance schemes, contractor loan schemes, Stamp Duty Land Tax avoidance schemes, Employment allowance avoidance schemes (including fettered payments),
employee bonus tax avoidance schemes, VAT contrived non-profit making body (regarding sporting educational or training) schemes, Business premises renovation allowance schemes, gift-aid with no real gift, stripped bond tax avoidance schemes, car benefit/plan
green schemes, share loss relief schemes, property business loss relief schemes, sideways loss relief schemes and employer financed retirement benefit schemes. 

Whilst we cannot offer you tax advice we can work with a tax expert in order to best protect your position and can look at the possibility of claim to recover any losses from your former adviser.


[1] Revenue and Customs Commissioners v Brockenhurst College [2015] EWCA Civ 1196

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