No EIS relief for shares carrying preferential rights

The taxpayer supplied mail solution services. It issued new A and B shares having sought advance assurance from HMRC that they would qualify for relief under the enterprise investment scheme (EIS). HMRC said authorisation would be provided if the company filed a satisfactory EIS 1 certificate. This included certification that the shares complied with the requirements of ITA 2007.

After issuing the shares the taxpayer submitted form EIS 1. HMRC refused to grant authorisation saying the B shares carried a preferential right (ITA 2007 s 173(2)(a)).

The First-tier Tribunal dismissed the company’s appeal. It claimed that its articles of association revised when the shares were issued provided for the dividends to be paid without a company or directors’ declaration.

The Upper Tribunal said it was necessary to consider both sets of articles together. It agreed with HMRC’s submission that in the original articles article 30 provided...