In a decision released on 26 July, the Upper Tribunal has allowed HMRC’s appeal in Ingenious Games LLP & Others v HMRC and dismissed the LLPs’ appeals.

The First-tier Tribunal had concluded that the film LLPs (but not the Games’ LLP) were trading with a view to profit on the basis that the LLPs contributed 30% to the films’ budget to acquire a 30% share of the films’ distributable income.  In a supplementary decision the FTT concluded, however, that the film LLPs could not claim loss relief for their 30% contribution because it was a capital expense.

The UT has now agreed with HMRC that the film LLPs (like the Games’ LLP) were not trading but were investing.  Furthermore, in agreement with HMRC, the UT also concluded that none of the LLPs’ activities were conducted with a view to profit but were designed to realise losses for their members to ensure that members’ contributions were finance by the UK Exchequer through claims for loss relief.

Malcolm Gammie QC appeared as counsel for HMRC in both the FTT and UT, leading a team of 8 counsel including Oscar Schonfeld.

The full decision can be found here