On Friday morning a press release from Her Majesty’s Revenue and Customs (HMRC) wrongly and deliberately grouped the Ingenious judgement at the First Tier Tax Tribunal together with a proven tax avoidance scheme called Icebreaker leading to a number of misrepresentations in the media. Ingenious now finds itself compelled to set the record straight.

On Tuesday last week, the Tribunal ruled that Ingenious’s film partnerships were trading and that that trade was conducted with a view to profit. This vindicates Ingenious’ position which it has repeatedly stated over the last 10 years, that its film partnerships were bona fide businesses run for a commercial profit.

In contrast, the Upper Tribunal on Friday upheld the decision of the First Tier Tribunal that the Icebreaker scheme was not conducting a trade with a view to profit and as such was set up for the sole purpose of avoiding tax, drawing a clear distinction with the Ingenious case.

The HMRC release also contained a number of false assertions that have since been reported in the media. Whilst these may apply to the Icebreaker scheme, in the Ingenious case these are entirely false. Ingenious would like to make the following clarifications on the record:

1. The Ingenious investors received no more tax relief than the cash they invested. Furthermore, investors have incurred no legal costs in this fight, all of which have been paid for by Ingenious.

2. Although part of the tax relief on film costs has been disallowed, a corresponding proportion of film income will no longer be taxed. In the case of all our partnerships, this will result in less taxable income being brought into account than would otherwise have been the case.

3. As a result we believe investors are better off now than if they had accepted HMRC’s offer to settle four years ago, and considerably better off than the position HMRC had attempted to argue at the Tribunal which would have seen them receive no tax relief on their investment.

Neil Forster, Ingenious CEO, said:

HMRC appears to be deliberately confusing the Ingenious case with proven tax avoidance schemes and making assertions which are factually wrong.

The Ingenious investors received no more tax relief than the cash they invested. Furthermore, investors have incurred no legal costs in this fight, all of which have been paid for by Ingenious.

We are disappointed that the Tribunal has restricted tax relief on the costs of the films however believe that investors are better off as a result of this judgement than if they had accepted HMRC’s offer to settle four years ago, and considerably better off than the position HMRC attempted to argue for some years before the Tribunal which would have seen them receive no tax relief on their investment.

It is important to note that as well as the restriction on loss relief the Tribunal also ruled that the tax on film income should be restricted, reducing the amount of tax payable by investors.

We remain disappointed that the Tribunal decided to award film investors only partial loss relief and to restrict all loss relief for games investors. We are actively reviewing the judgement and considering an appeal to seek the maximum redress for our investors.

We are very proud of our track record in supporting the UK film industry and look forward to the release of our latest feature film, A United Kingdom starring David Oyelowo and Rosamund Pike, which opens the London International Film Festival in October.

Neil Forster

CEO

Notes to editors:

1. Founded in 1998 by Patrick McKenna, Ingenious has produced and co-financed hundreds of feature films and more than 550 hours of television programming with partners including 20th Century Fox, Sony Pictures, NBC Universal, Warner Brothers, Paramount Pictures, Disney, Lionsgate, Film4, Pathé, the BBC, ITV and Endemol Shine.

2. Ingenious is a serial investor in the global creative economy, having raised and deployed more than £9 billion across the creative sector, as well as in real estate and infrastructure projects.

We are pleased to report that, contrary to some press coverage, the Tribunal has drawn a clear distinction between our film production partnerships and other film-related arrangements which have appeared before the courts over the last couple of years.  In contrast with those cases, the Tribunal has found the Ingenious film partnerships to be trading and that those trades were conducted with a view to profit, although on a different basis to that which the partnerships argued before the Tribunal.

The argument that the partnerships were trading and were doing so with a view to profit is one which we have consistently maintained throughout both the enquiry process and litigation.

The purpose of this statement is to provide more detail about the Tribunal judgment. For investors and general readers alike, however, it should be clearly understood that, irrespective of this long-running and historic dispute with HMRC, the verdict of the Tribunal has no bearing whatsoever on any of our current business activities, whether they be EIS and Business Relief qualifying activities in media, or more widely in infrastructure and real estate.

The Tribunal concluded that none of the film partnerships were carrying on a trade with a view to profit on the bases argued by the partnerships. From our initial reading of the decision, this appears to be based on the Tribunal’s view that it was unrealistic, at the point of greenlighting (that is to say at the point of committing to produce each film), to hope that the films would be profitable. We strongly disagree, based upon the clear evidence that was presented to the Tribunal and the testimony of expert witnesses. The Tribunal itself concluded that there was at least a speculative hope of profit and that the films produced by the partnerships were capable of generating profits.

The Tribunal did however conclude that the partnerships were trading with a view to profit if production costs were restricted to 35% for Inside Track films and 30% for Ingenious Film Partners films, with taxable film income being restricted based on the same underlying principle – and that this approach to cost and income recognition should then form the basis for the preparation of the partnerships’ accounts.

We were therefore successful in pressing our case on a particularly important issue in front of the Tribunal, even though this success must be qualified in the manner described above.

In the case of Ingenious Games, we are extremely disappointed that the Tribunal concluded that the partnership was not trading and the partnership’s business was not conducted with a view to profit (on the basis that the partnership argued before the Tribunal). However, the partnership’s business was found to be conducted with a view to profit if game development costs were restricted to 30%, with taxable game income being restricted based on the same underlying principle. Again, we disagree.

In our opinion, certain of the Tribunal’s conclusions, as regards both our film partnerships and our games partnership, are based on a number of arbitrary and subjective interpretations and are unreasonable.

The broad impact of the adjustments made by the Tribunal is to reduce the trading losses allocated to investors and therefore reduce their ability to offset those losses against their tax liabilities in the relevant financial years.  The precise impacts will take some time to process, given the volume of adjustments required on a film by film (or game by game), year by year basis.  This process will also necessitate further discussion with HMRC, as directed by the Tribunal, which will inevitably take some time.

We are in the process of studying the detail of this very long and complex judgment (which runs to nearly 350 pages) and are actively considering the terms of an appeal. We have 56 days to start any appeal.

We will provide a more comprehensive update to investors once we have reviewed the fine detail of the judgment and determined the expected impact on partners’ tax returns, which will take several weeks.

In the first major tie-up of its kind between a UK media company and a Chinese fund backed by private and government investment, Ingenious, the London-based backer of last season’s Oscar contenders Brooklyn and Carol, as well global blockbusters Avatar and Life of Pi, has formed a joint venture with Hejing to produce and co-finance a slate of independent films in a deal worth $200 million.

This initial venture marks the first step in what Ingenious and Hejing hope will be a long running partnership between the two parties.

The deal comes just two years after a landmark UK-China co-production treaty was signed by Culture Minister, Ed Vaizey and SARFT’s (State Administration of Radio, Film & Television) Vice Minister, Tong Gang.

Ingenious has developed a reputation as a leading player in the global film and television industry over the last 18 years.

The global market for entertainment content is experiencing an exciting period of change – from the seismic shifts in individual consumption patterns to the unprecedented growth in China. Any long-term global growth strategy has to involve an alignment with the right kind of partners, and we couldn’t be more delighted to be working alongside Hejing to continue to bring high-quality entertainment to global audiences.

Neil Forster

CEO at Ingenious

As a leading culture company under the SARFT system (Chinese state administration for radio, film and TV production), Hejing has played a very important role in saving traditional Chinese culture by editing and republishing some of the most distinguished Chinese books from ancient times.  Now that we have collected and have ownership of such important Chinese stories and their associated rights, it’s time to go international and show the world the charm of Chinese content and Chinese story-telling.

We’re so honoured to launch this programme of internationalisation by partnering with Ingenious, a wonderful film company with an unbelievable track record. I truly believe we can co-develop some great western and eastern film and TV projects together.

Zhang Aiyi

CEO of Hejing Culture

The UK film industry is one of our greatest success stories, powered by the huge wealth of creative talent that exists in the UK, both on and off screen. It’s fantastic to see collaborations such as this come about as a result of the landmark UK-China co-production treaty.

Ed Vaizey

UK Minister of Culture

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Financial Times

City AM

Ingenious Estate Planning (IEP), the discretionary fund service managed by Ingenious has, through its investee company Ingenious Renewables Energy Enterprises Limited (IREEL), closed an acquisition of two ground mounted solar PV plants in Derbyshire.  The plants have a total combined capacity of c. 8MW and were acquired from Solarig Italia Development s.r.l, the Spanish EPC contractor (Solarig).

This transaction is the first part of the planned acquisition of a wider portfolio from Solarig which is expected to be completed before the end of the current subsidy scheme.  The existing plants will benefit from 1.3 ROCs (Renewable Obligation Certificates) as they were connected before the end of March 2016.  The smaller plant, a 3MW installation, is located in Yeldersley, Derbyshire while the other 4.8MW project is nearby in Alfreton.  Both plants are equipped with tier-one Talesun Solar panels and Power Electronics inverters.

The two plants are expected to produce in excess of 7,700 MWh of green electricity per year; enough to power some 2,000 houses with a Co2 saving of more than 4,300 kg per year.

A third plant, also located in Derbyshire, is proposed to be acquired from Solarig by IREEL with a total installed capacity of 4.9MW is currently under construction and is proposed to be connected by August 2016 under the 1.2 ROCs scheme.

IREEL are also in discussions with Solarig in relation to the proposed acquisition of a further 4 ground mounted solar PV plants in the UK which are expected to be constructed and acquired before March 2017.  If these transactions proceed, this will bring the total ground mounted solar PV portfolio invested in by IEP to around 40MW in size.

SgurrEnergy assisted as technical advisor while Berwin Leighton Paisner acted as legal advisor for IREEL, with Addleshaw Goddard having acted as legal counsel for Solarig.

We are delighted that Jonathan Strange and Mr Norrell has won two Baftas at this year’s Television Craft Awards. The period drama, backed by Ingenious Broadcasting, took home trophies for Special, Visual & Graphic Effects and Production Design at the London ceremony on Sunday evening. 

The debut novel by British writer Susanna Clarke depicts an alternative history in which magic is widely acknowledged, but rarely practised. The series, which focuses on magician Mr Norrell (Eddie Marsan) and his apprentice Jonathan Strange (Bertie Carvel), investigates the nature of ‘Englishness’ and the boundaries between reason and unreason. 

The programme, which aired on BBC One in 2015, also received two further Bafta nominations as well as high praise from critics across the globe. 

Ingenious is pleased to have been involved in the production of Marcella, written by internationally renowned screenwriter and novelist Hans Rosenfeldt starring Anna Friel in the lead role.

Marcella follows a former fast-track Metropolitan Police detective, played by Anna Friel. She returns to the murder squad after 11 years, following a traumatic divorce, to find a notorious killer.

The new series also stars, Laura Carmichael, Nicholas Pinnock and Sinead Cusack.

Marcella was produced with the support of Ingenious Broadcasting. The 8 part series will air on Monday 4 April at 9pm.

We are delighted that Jonathan Strange and Mr Norrell has won two Baftas at this year’s Television Craft Awards. The period drama, backed by Ingenious Broadcasting, took home trophies for Special, Visual & Graphic Effects and Production Design at the London ceremony on Sunday evening. 

The debut novel by British writer Susanna Clarke depicts an alternative history in which magic is widely acknowledged, but rarely practised. The series, which focuses on magician Mr Norrell (Eddie Marsan) and his apprentice Jonathan Strange (Bertie Carvel), investigates the nature of ‘Englishness’ and the boundaries between reason and unreason. 

The programme, which aired on BBC One in 2015, also received two further Bafta nominations as well as high praise from critics across the globe. 

Ingenious Renewable Energy Enterprises Limited, has purchased the development rights to construct an anaerobic digestion (AD) plant on land at Fairfields Farm, near Colchester.

The rights to develop the plant were acquired from Qila Energy LLP and the project consists of an AD plant that will digest approximately 30,000 tonnes of organic material each year. This will produce circa 3.0m cubic meters of natural gas per annum which will be fed into the local gas distribution network for onward consumption by local industry and households.

The gas-to-grid AD plant is expected to be operational in 2016 with predictable, index linked revenue streams which will include FITs and RHI rates.

Imran Sheikh led the deal for Ingenious.

We are absolutely delighted that Brooklyn, backed by our Shelley Media fund, has won the coveted Outstanding British Film award at last night’s BAFTAs. The film won the category competing against Amy, 45 Years, The Danish Girl, The Lobster and Ex Machina. The award was presented by Idris Elba and Kate Winslet.

Set in nineteen-fifties Ireland and New York, Brooklyn tells the story of young Eilis Lacey (Saoirse Ronan), an Irish girl who, lured by the promise of the USA, leaves behind her family to start a new life in New York. The film was adapted by Nick Hornby from the 2009 award-winning novel by Colm Tóibín. Speaking at last night’s ceremony, Hornby said that getting Brooklyn to the big screen was not easy:

‘This film was really, really hard to put together… it took five years to get to production because no one would fund us. You have to sort of pinch yourself really to think that it’s made it all the way through to this.’

Brooklyn has also been nominated for best picture in this year’s Oscars.

The Broadcast Awards took place this week and we are delighted that three productions backed by Ingenious have been recognised. Tasked with rewarding the UK’s most successful television content, creators and channels, the prestigious awards ceremony is one of the most hotly anticipated events in the television sector and is attended by British television’s most influential people, who come together to celebrate the best of the industry.

Dr Foster, backed by the Ingenious Estate Planning service, won best drama series, with Clangers and So Awkward (both backed by Ingenious Broadcasting) winning best pre-school programme and best children’s programme. Judged by some of the industry’s biggest names, the awards cover key genres and reward creativity, quality and originality.