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HMRC rejects film industry tax avoidance criticism

HM Revenue & Customs (HMRC) has rejected criticism over how it has handled the exploitation of tax breaks for the film industry, which Treasury chairman Andrew Tyrie claims has been “financially calamitous” for some investors.

HMRC rejects film industry tax avoidance criticism

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In a letter to chancellor Philip Hammond, the Conservative member of parliament wrote: “If a tax avoidance scheme is found by the courts to be illegal, then investors in the scheme have no option but to repay the tax that they have avoided.

“But HMRC needs to treat people fairly, including investors in what are now considered to be tax avoidance schemes, and to be transparent and timely in their approach,” reports The Financial Times.

Tyrie cited press reports referring to suicides within investor circles and an acknowledgement by HMRC that investors could face “life changing bills”.

Some film scheme investors were warned by HMRC in November that they face payment demands up to 10 times the value of their initial investment.

An HMRC spokesperson said: “We have worked hard to tackle abuse in the system on behalf of the vast majority of investors who play by the rules, ensuring they are enforced fairly, and with sensitivity,” reports the BBC.

Tax liability

The MP said that his office had been contacted by growing numbers of people concerned that the taxman’s investigations into schemes that allow artificial losses to be created for film investors were “not always fair nor what anyone could have expected”.

The losses allowed investors to lower their tax liability.

He suggested that the blame lay partly with the Labour government which introduced tax breaks for films that were “too generous and ill defined”, adding that “it was a clear example of how tax reliefs aimed at a specific policy […] can result in unacceptable complexity in the tax system”.

“Many have said that, when these schemes were being sold, they were not considered to be aggressive avoidance but just a deferral of tax, and they were often marketed as routine tax management,” Tyrie wrote.

“Whether or not these claims are valid, it does appear that many individuals are facing very severe financial distress as a consequence.”

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