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The business Wrapit Ltd was a qualifying company for the enterprise investment scheme. The taxpayers were directors of the company in which they held shares and made loans to it.
HMRC argued that the directors were connected to the company because they owned more than 30% of the loan capital and share capital; they did not therefore qualify for enterprise investment scheme relief.
The First-tier Tribunal found for the taxpayers and HMRC appealed.
The Upper Tribunal (Tax and Chancery Chamber) said TA 1988 s 291B(1)(b) had to be interpreted as referring to a ‘single composite category to which the 30% threshold is applied’: share capital and loan capital should be added together. This should not cause uncertainty for investors claiming enterprise investment scheme relief.
A shareholder would have to take care depending on the size of his...
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