Company’s objective was to develop in the long term

The taxpayer a film production company issued shares under the seed enterprise investment scheme (SEIS) with HMRC’s approval. In 2018-19 the taxpayer issued an investment memorandum seeking £400 000 of investment to enable it to make sell and distribute a film The Ballad of Billy McCrae. This was later scaled back to £50 000.

In June 2019 the taxpayer submitted a form EIS1 compliance statement to HMRC in respect of an issue of shares in April 2019. HMRC refused to authorise the form because it was not satisfied that the company had ‘objectives to grow and develop its trade in the long term’.

The taxpayer appealed.

The First-tier Tribunal ruled that the net investment return was ‘extremely speculative’ and wholly dependent on the commercial success of the film. It was ‘perfectly possible’ that the investors could lose all of the amounts they subscribed ...