Not connected

The taxpayers claimed enterprise investment scheme relief in respect of sums subscribed for eligible shares in Wrapit plc.

HMRC refused the claim on the ground that the taxpayers were connected with the company as they held more than 30% of its loan capital and issued share capital.

The taxpayers argued that TA 1988 s 291B(1) imposed a dual test rather than a single one. A person was connected if he held more than 30% of the loan capital as well as more than 30% of the issued share capital. HMRC argued that the test combined the two.

Agreeing with the appellants the First-tier Tribunal judges said the legislation denied relief to individuals who were connected with the issuing company in one or other of the grounds set out in the section.

So although each appellant owned more than 30% of the loan...