A film scheme backed by a host of football stars and celebrities has lost a court battle to overturn a £700 million tax bill.
The Ingenious Film Partners 2 LLP scheme attracted around 1,400 stars, including Manchester United footballer Wayne Rooney, alongside former footballer stars David Beckham and Gary Lineker. TV double act Ant and Dec and ex-Newsnight host Jeremy Paxman were also among the scheme's backers.
The investors each paid a minimum of £100,000 into the scheme, which offered tax breaks in return for helping fund box office hits. Life of Pi, Avatar and Girl With a Pearl Earring, were among the blockbuster films Ingenious helped bring to the big screen.
Film Partnership schemes were introduced by the government to encourage British film production and in turn generate considerable revenue for the UK economy. The majority were invested in between 2004-2007 when Gordon Brown was prime minister.
However, HM Revenue & Customs (HMRC) has since judged that these vehicles were used as method to avoid tax. Last August a court ruled investors should only receive tax relief on 30% not 100% of their investment.
The tax office had argued that production costs associated with making the films were capital costs, meaning investors were not due any tax relief on this either.
Ingenious said it 'strongly disputed this interpretation on the basis that it was completely at odds with the whole thrust of a very lengthy and closely argued judgment'.
After declining to overturn last summer's original ruling, tribunal judge Charles Hellier admitted it was a tough call. 'We have not found this an easy decision, and are comforted by the fact that others have had similar difficulties with the concept of capital.'
HMRC said: 'We are pleased that the tribunal has agreed with us that the vast majority of what was claimed in tax relief by Ingenious investors was simply not due.'
Ingenious said it would appeal the ruling: 'We strongly disagree with the tribunal’s clarification of a technical matter from its summer 2016 ruling,' a spokesperson for the firm told reporters.
'It is wholly unsatisfactory that the tribunal reached this decision with ‘misgivings and reluctance’. We will be appealing the entire decision of the tribunal.'