Arrangements were within condition A

In 2014 HMRC granted the taxpayer a company incorporated to exploit intellectual property (IP) in a pre-school animation project advance assurance that it would be entitled to issue shares qualifying for enterprise investment scheme (EIS) or seed enterprise investment scheme (SEIS) relief.

In 2016 the taxpayer entered into a production services agreement (PSA) with another group company (Entertainment). In return for an agreed sum Entertainment would deliver all aspects of production and delivery of 52 episodes of the project.

The taxpayer issued shares between 2015 and 2018 but HMRC refused to issue the compliance certificates for the shares on the basis that it did not meet the risk capital condition and there were disqualifying arrangements (ITA 2007 s 178A).

The First-tier Tribunal dismissed the taxpayer’s appeal. It found that the taxpayer met the risk to capital condition because the evidence showed it had the clear...