POLITICS

Andrew Mitchell 'Tax Avoidance' Scheme Highlighted By HM Revenue & Customs

17/07/2014 14:32 BST | Updated 17/07/2014 14:59 BST
Stefan Rousseau/PA Archive
Andrew Mitchell and his wife Dr Sharon Bennett during a press conference in London, as he gives his reaction to the Crown Prosecution Service decision on the Plebgate row.

While not known to be as witty as Jimmy Carr or as successful at cobbling together a pop masterpiece like Take That, 'Plebgate' MP Andrew Mitchell does now appear to have one thing in common with the aforementioned.

Tax avoidance.

A film finance company, Ingenious Film Partners 2, into which he invested, used legal loopholes to generate large amounts of tax relief.

Investors paid in a minimum of £36,000 which was then topped up with a £64,000 loan from the company.

This money was then used to buy shares in film productions which made a loss of £90,000 within a year.

Those in the top rate of tax then had the option to write off the loss incurred against their own taxes.

This meant they recouped the original investment while still retaining the £100,000 stake.

The HMRC have claimed the expenses incurred by the scheme do not relate "wholly and exclusively to the carrying on of any trade".

Although Ingenious has been involved in such well-known films as X-Men: The Last Stand, Garfield: A Tale of Two Kitties, it has also invested in much less successful films that have made a loss.

HMRC are entitled to challenge the company's actions. If it wins any subsequent case they can keep the money but if it loses it will have to reimburse investors.

Mitchell said in a statement: "When the last Labour government introduced tax incentives to invest in the British film industry, along with many other investors I did so through Ingenious Films. I resigned from Ingenious when I was in government and always pay all tax when due."

Ingenious, the company that runs Ingenious Film Partners 2, told the BBC: "HMRC has failed to distinguish between commercial businesses and tax avoidance schemes and have, without proper consideration, deemed all film arrangements to be tax schemes."