Guardian News and Media/London
The businessman who gave the Labour party £1.65mn worth of his company’s shares belongs to an investment scheme operated by a firm that has been accused by one of the party’s most senior MPs of exploiting tax loopholes and being “utterly and totally immoral”.
The revelation is likely to further embarrass Labour, which is already under fire for the manner in which shopping magnate John Mills made his donation to the party.
It threatens to undermine Labour leader Ed Miliband’s attempts to position his party on the moral high ground of the tax debate, following his recent attack on companies such as Google for going to “extraordinary” lengths to limit the amount they pay HM Revenue and Customs.
Accounts filed at Companies House show that Mills is a member of Tamar Films LLP, a partnership run by Ingenious Media, which has attracted controversy and the attention of HMRC.
Partnerships such as Tamar - which has interests in several films, including The Last King of Scotland and This Is England - were established after Gordon Brown introduced legislation that was designed to promote the British film industry. However, critics say they have been used for tax avoidance, a claim that is fiercely denied.
Last December Margaret Hodge, the Labour head of parliament’s public accounts committee, accused Ingenious, along with a number of other companies, of “running rings” around HMRC and branded the company immoral.
She said firms such as Ingenious were “exploiting a well-intentioned tax relief to try to get individuals to mitigate their taxes”.
However, Ingenious vehemently rejected Hodge’s claim that it uses tax legislation “for a purpose not intended by parliament”.
Appearing before the committee its chief executive, Patrick McKenna, told Hodge: “I can tell you categorically that we are not in the business of tax avoidance.” He later explained that, while Ingenious members did “receive tax relief, they do so in accordance with the purpose of the legislation and not in some other inappropriate way”.
He added: “Our partnerships not only operated in accordance with the legislation, complying fully with detailed guidance notes published by HMRC; they also subsequently received HMRC approval.”
However, following an HMRC inquiry that has been running for more than seven years, Ingenious is to go before a tax tribunal next year.
The tribunal will determine the status of several of Ingenious’s film partnership schemes, which have attracted investment from some of the UK’s wealthiest individuals, including Mills, whose links with the firm are now likely to revive the row over his recent donation to Labour.