No EIS relief because of disqualifying arrangement

In 2014 HMRC granted the taxpayer advance assurance that it would be entitled to issue shares qualifying for enterprise investment scheme (EIS) or seed enterprise investment scheme (SEIS) relief. The taxpayer’s trade was producing a children's animated television show and exploiting its intellectual property through merchandising. The taxpayer issued shares between 2015 and 2018.

In 2018 after requesting more information about the taxpayer’s activities HMRC refused to issue the compliance certificates for the shares. It said the company did not meet the risk capital condition and there were disqualifying arrangements.

The taxpayer appealed.

The First-tier Tribunal found that the company did meet the risk to capital condition because the evidence showed it had the clear intention to grow and develop its trade. The company’s sole stated aim was to exploit its intellectual property. It appointed a reputable production studio to produce a high quality product which would be attractive...