In Innovate Commissioning Services Limited v HMRC [2017] TC 06152, the First Tier Tribunal (FTT) followed the precedent in X-Wind Power to deny SEIS relief where the incorrect forms were filed.
The relevant legislation denies Seed Enterprise Scheme (SEIS) relief to investors in a company which has issued shares under the Enterprise Investment Scheme (EIS). There has been an excessive number of cases before the FTT where EIS forms were filed in error and SEIS relief was denied. These were not binding, but precedent has been set by the Upper Tribunal (UT) in X-Wind Power Limited v HMRC [2017] UKUT 0290.
On 26 June 2014 Innovate Commissioning Services Limited (ICS) requested advance assurance from HMRC that SEIS would be available, which was granted.
On 20 July 2015, ICS submitted form EIS, rather than the correct SEIS1. HMRC queried this, given the previous assurance, but it appears that they moved offices while it was en route. HMRC then issued EIS2, confirming the relief was available.
When ICS became aware they attempted to withdraw the EIS1 and substitute from SEIS1, but HMRC rejected this.
ICS attempted to distinguish this case from the precedent because:
- They had applied for (and been granted) advance assurance for the SEIS.
- HMRC had queried the EIS1 submitted in error.
The FTT held that a compliance statement had been submitted and this was the test under s.257DK to deny SEIS. Once the incorrect form had been submitted it could not be withdrawn.
Comment
Companies frequently get caught out by the complex SEIS and EIS rules. This can be avoided by taking the assistance of a suitably qualified adviser.
It is interesting that HMRC actually contended the 'cut off' should be their issue of authorisation (i.e. form EIS2) rather than (as the FTT held) the submission of the compliance statement (i.e. form EIS1).
Following the decision in Fashion on the Block Ltd v HMRC [2021] TC08248 all may not be lost if the wrong forms have been submitted. The FTT distanced this case from the decision in X-Wind Power Limited v HMRC [2017] UKUT 0290 as from the covering letter and advance assurance application it should have been clear to HMRC that the wrong form had been submitted and the intended relief was SEIS. Qualifying shares had been issued to subscribers.
Useful guides on this topic
Enterprise Investment Scheme (EIS)
When can EIS relief be claimed? What are the conditions for EIS relief? What are the benefits of EIS relief?
Seed Enterprise Scheme (SEIS)
When can SEIS relief be claimed? What are the conditions for SEIS relief? What are the benefits of SEIS relief?
SEIS/EIS share issue checklist
Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) share issue checklist: Issue and allotment of shares
External link
Innovate Commissioning Services Limited v HMRC [2017] UKFTT 0741
