Permission to appeal granted in Ingenious Tax litigation

Permission to appeal has been granted in the case of Ingenious Games LLP & Ors v HMRC; the high profile and substantial tax litigation in which Ruth Hughes and Sam Chandler are acting for HMRC (led by Malcolm Gammie CBE QC of One Essex Court).

The proceedings concern the question of whether various limited liability partnerships involved in the films and games industries were trading with a view to profit so as to benefit from the transparency provisions in ITTOIA 2005 / CTA 2009, as well as whether millions of pounds worth of claimed expenditure is deductable for the purposes of TA 1988 / ITTOIA 2005.

HMRC were largely successful before the First-tier Tribunal (the “FTT”), which handed down its main decision in August 2016, and a further supplemental decision in May 2017 on the question of whether, in light of the FTT’s main decision, expenditure on film income rights was in the nature of capital or revenue (and therefore deductable in the computation of the LLPs’ profits and losses).

The LLPs have appealed to the Upper Tribunal, and HMRC has cross-appealed various other elements of the FTT’s main decision.

Permission to appeal was granted by the FTT on 19 September 2017.

Aside from its considerable legal significance, the litigation involves many well known investors and films which are household names, including Avatar, Shaun of the Dead, Life of Pi and Die Hard 4, and as a result it has had wide coverage in the UK press. The amount of tax at stake is approximately £1 billion.