Upfront payments loom over tax schemes

In a heated week for celebrity users of tax avoidance schemes, promoters have been alerting clients that they are likely to get accelerated payment notices when the Finance Act comes into force later this month.

The Times reported that Ingenious Media, a firm providing tax-efficient investment schemes for the creative industries had sent a letter to around 1,300 former and current investors pre-warning them of impending HMRC requests relating to vehicles that are being challenged by HMRC. Ingenious is taking the case to the tribunal, and is hoping it will be heard towards the end of 2014.

Ingenious asserts its partnerships are not tax avoidance schemes, but commercial investments in movies such as the Life of Pi and Avatar. It also had a video games vehicle responsible for games such as Colin McRae’s Dirt.

The firm's partnerships attracted more than £700m from high profile investors such as footballers Steven Gerrard, David Beckham, and Wayne Rooney. Anne Robinson, composer Andrew Lloyd Webber and cricketer Andrew Flintoff were also users of the scheme.

The clauses were published in draft form in January and sparked a campaign among tax professionals who objected to HMRC being allowed to act as judge and jury to deem which schemes should be covered by the upfront payments.

The new law will allow HMRC to send notices to investors of defeated schemes from the past decade, requiring them to pay tax avoided up front. In some cases this could amount from thousands to millions of pounds.

As part of a continuing focus on tax avoidance, The Times subsequently published an article listing more celebrity avoidance scheme users, including the Arctic Monkeys.direct debt recovery, a power allowing HMRC to extract tax due directly from taxpayers' bank accounts, which is being lined up for next year's bill.

Ingenious said in a statement that the FA2014 clauses were “de facto retrospective, indiscriminate and unfair”.

“The Law Society, the CIOT, the ICAEW and the House of Commons Treasury Select Committee have all been critical of the legislation," it said. 

The statement continued by saying Ingenious had tried to get a definitive ruling on the tax status of its film and games partnerships for years, but that HMRC has “repeatedly used stalling tactics to delay a hearing”.

“It is fundamentally unjust to demand payment before the tribunal has given its ruling,” the company said.

Revenue inspectors have already sent letters to members of one suspected scheme promoted by NT Advisors, according to the Times.  

The new measures also include disputed tax associated with schemes, subject to DOTAS and taxpayers being investigated under the new GAAR.