Legal case brought against RBS-owned Coutts

A class action involving 220 of the bank’s customers has been filed against Coutts, along with UBS and other advisers, over a £100 million-plus bill they face in back taxes and interest from HM Revenue and Customs.

As Coutts is owned by still 73 per cent state-owned Royal Bank of Scotland, should Stewarts Law, which is handling the case of the claimants, be successful, it would effectively mean that taxpayers would shoulder part of the bill.

The case centres around partnerships created by Ingenious Media, which organises investment for film and video game production.

Because films usually run at a loss initially, financial advisers believed the enterprises could be used to offset profits made elsewhere, and effectively negating tax.

Thousands of wealthy individuals, including high-profile footballers, ploughed money into the schemes in the early 2000s, with a string of banks and financial advisers marketing them to clients.

HMRC has been investigating the schemes and has embarked on court proceedings to prove that they were not legitimate businesses.

David Pickstone, head of tax litigation at Stewarts Law, said: “Investors were assured that these partnerships were entirely legitimate trading businesses seeking to make profit through financing films and video games.”

Individuals who invested in the schemes have argued that the schemes were sanctioned by the government and promoted to encourage the film industry.

Mr Pickstone added: “While investors have been vilified for seeking to avoid tax, the reality is that they invested and lost substantial capital having been assured that any losses would be mitigated by government-sponsored tax reliefs.”

The first tier tax tribunal, which handles complaints about HMRC decisions, issued a mixed ruling early last month, saying that some elements of the schemes were liable for tax relief but others were not – meaning both Ingenious and HMRC could appeal.

As a result of the qualified ruling, some investors face a call for “accelerated payments” to HMRC of tax and, in some cases, high levels of interest.

The case could face delays if HMRC or Ingenious appeals against the August decision.

Coutts and UBS have not commented but a company spokesman for Ingenious Media said: “We are still digesting what by any standards is a highly complex judgment and at the same time considering an appeal.”