Use of money

In 1998/99 the taxpayer R realised a substantial chargeable gain and reinvested it in Skye Inns which ran public houses. The firm was a qualifying company that carried on a qualifying business activity for the purpose of enterprise investment scheme relief (TCGA 1992 Sch 5B para 1).

Specifically the taxpayer subscribed for shares in three tranches. HMRC accepted that the sums invested in the first two tranches satisfied the conditions for relief under the enterprise investment scheme.

However the Revenue disputed that relief was due in respect of the third tranche of investment money which was kept in an instant access investment account due to the acquisition of a public house falling through with the result that 80% of the money subscribed had not been employed in the company’s trade.

To qualify for relief under...