You might also be interested in
Replies (6)
Please login or register to join the discussion.
Media campaign
There seems to be something of a media campaign on this, the tone of which is that footballers have been "at it" and now are being made to pay.
I confess I don't know the full details but the ingenious schemes seem to have invested in genuine films, many of which have been commerically succesful.
HMG offered tax breaks to people preapred to invest. People invested and got tax breaks.
Now HMG are pursuing them (complete with APNs) and the media are having a field day in the current anti-avoidance hysteria which can barely tell the difference between legitimate planning and robbing a Post Office armed with a sawn-off shotgun.
If bankruptcies follow and Ingenious win their case, what then? Apologies from HMG? Apologies from the media? I doubt it. It'll probably be portrayed as a win by cheating tax avoiders "on a technicality".
Circular loans
I confess I don't know the full details but the ingenious schemes seem to have invested in genuine films, many of which have been commerically succesful.
HMG offered tax breaks to people preapred to invest. People invested and got tax breaks.
Except they were claiming tax breaks on amounts far in excess of what they actually invested. The way these things usually 'worked' was that there would be a c. £1m genuine investment, and then another £5m borrowed. The total £6m would be 'invested', but with £5m going straight back to the bank who lent the money. Tax relief would be claimed on the full £6m, despite the investor only actually having put in £1m.
so......
So....the £5m the footballer borrowed from the bank would never have to be repaid?
And the £5m borrowed wasn't used to invest in the film? It was just handed straight back to the bank?
Is that what you are saying?
That would indeed be an odd set up.
Where have you got your background information from?
My (limited) understanding is that the loans came from ingenious themselves but are repayable and were used to invest in films and will (if the films are succesful) generate taxable income.
Tax deferral
So....the £5m the footballer borrowed from the bank would never have to be repaid?
And the £5m borrowed wasn't used to invest in the film? It was just handed straight back to the bank?
Is that what you are saying?
That would indeed be an odd set up.
Where have you got your background information from?
My (limited) understanding is that the loans came from ingenious themselves but are repayable and were used to invest in films and will (if the films are succesful) generate taxable income.
The way I understand it is that although it was 'invested' by handing over to the film company, the film company was usually required to deposit it at the bank which made the loan. And in fact the bank never transferred any money at all - it just made a debit entry for the (non-recourse) loan to the investor, with a credit entry for the deposit of the film company, and the film company could not withdraw that money unless and until the loan was repaid. Any interest was also usually calculated to be circular. So the bank never had any money at risk either.
Yes, taxable income could/would be generated later but that's how tax deferral schemes operate...
@the Limey. sorry to repeat myself.....
But where did you get your information from?
That's a fairly detailed understanding of the scheme that you're demonstrating.
If the loan was non-recourse, what was the collatoral being offered by the investor?
What exactly did the film company have to gain from this? It needed money to make a film but didn't get any because it had to give any money it got straight back to the bank?
Having read some judgements
But where did you get your information from?
That's a fairly detailed understanding of the scheme that you're demonstrating.
I have read a few of the judgements on previous schemes. The ones I am describing are some of the direct film investment ones. There are some others that involve investment in film rights (e.g. purchases from Disney, etc) where the arrangements are quite different.
If the loan was non-recourse, what was the collatoral being offered by the investor?
No collateral - the bank was getting its money back immediately through the circular transaction so didn't need any (in reality, the only 'movement' of money was a book entry at the bank).
What exactly did the film company have to gain from this? It needed money to make a film but didn't get any because it had to give any money it got straight back to the bank?
The film company got £1m of the £6m for investing in the film. Of course, the investor had got themselves a current year tax deduction of more than £1m...