In X-Wind Power Limited v HMRC [2017] UKUT 0290, the Upper Tribunal (UT) considered whether relief under the Seed Enterprise Investment Scheme (SEIS) was blocked because the company filed an Enterprise Investment Scheme (EIS) (rather than SEIS) compliance statement in error. It was.
- X-Wind issued shares under the Seed Enterprise Investment Scheme (SEIS) in a number of tranches.
- In March 2013 the company submitted a compliance statement to HMRC but used form EIS1 not SEIS1. This was agreed to be an innocent error but nothing indicated to HMRC that this should have been SEIS.
- In May 2013 HMRC authorised X-Wind to issue Enterprise Investment Scheme (EIS) compliance certificates to its investors.
- In April 2014 a SEIS compliance statement was submitted, this one correct.
- HMRC refused to authorise SEIS compliance certificates as SEIS is not available once there has been an EIS investment.
- In May 2014 X-Wind submitted form SEIS1 to replace the March 2013 submission.
- HMRC refused to accept the replacement submission.
- The company appealed to the First Tier Tribunal (FTT).
The FTT held:
- The EIS1 was validly submitted ergo could not be voided.
- The compliance statements are not claims under s.42(9) of TMA so there was no statutory right to submit a replacement.
- The SEIS was, therefore, not available on any of the investments.
On appeal, the UT confirmed the FTT decision.
Comment
Make sure you use the right forms and include covering letters!
The comments (from the FTT) that nothing indicated to HMRC that the first submission should have related to SEIS suggest that the decision could have gone differently if a suitable covering letter had been included. The case does not indicate whether advance assurance was sought before issuing shares.
This point was endorsed in Fashion on the Block Ltd v HMRC [2021] TC08248 where the First Tier Tribunal felt able to treat the decision in X-Wind Power as non-binding as the covering letter and advance assurance application which had been submitted should have made it clear to the HMRC officer reviewing the case that it was SEIS rather than EIS relief that was being applied for.
This was the case in Innovate Commissioning Services Limited v HMRC [2017] TC 06152 whereby HMRC attempted to flag that the wrong form had been submitted when compared to the advance assurance clearance. The taxpayer did not respond and once form EIS2 was issued the FTT agreed with HMRC that the SEIS relief was unavailable.
Useful guides on this topic
SEIS & EIS: Share issue checklist
A Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) share issue checklist for the issue and allotment of shares.
SEIS: Seed Enterprise Investment Scheme (subscribers)
When can SEIS relief be claimed? What are the conditions for SEIS relief? What are the benefits of SEIS relief?
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