Partial relief

The taxpayers were an individual and a company.

The former acquired the latter with the intention of making it a qualifying company under the enterprise investment scheme.

Over time the individual invested money informally with the company without a contract of allotment or a share application.

He later claimed enterprise investment scheme relief in respect of all the payments he had made. HMRC refused the claim.

The Special Commissioners dismissed the taxpayers’ appeal but the judge in the High Court overturned their decision.

HMRC appealed to the Court of Appeal. The case turned on whether certain payments should be treated as giving rise to debts or rights to an allotment of shares.

The facts showed the individual’s first payment would not qualify for relief but with regard to the rest there had been an effective agreement or enforceable understanding that shares would be allotted to...