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Ingenious Games LLP and others (TC5893)
Purchase and impairment of film rights – capital or revenue expenditure
This decision is a follow-up to the First-tier Tribunal decision in the main Ingenious Games litigation (TC5270) (see ‘Ingenious decision’ Taxation 11 August 2016).
In the main judgment the tribunal made findings on the key points of principle but left the parties to agree the figures based on these. The parties could not agree because there was a dispute over the tax treatment of the provisions made for the impairment of rights under the relevant film financing agreements. Although these amounts were properly deductible under UK generally accepted accounting practice (GAAP) there was a disagreement over whether they should be disallowed for tax purposes as capital expenditure under ITTOIA 2005 s 33.
The tribunal found this a difficult question to resolve. It had sympathy for the taxpayers’ argument that it would be ‘absurd if the expenditure on the rights...
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