Risk to capital condition was not met for EIS

The taxpayer was incorporated in February 2019 with NB as the sole director. Its activities were the raising of horses and other equines and the purchase and sale of bloodstock.

In addition to NB who held one share four other investors were allotted shares.

In November 2019 the taxpayer emailed to HMRC four EIS1 forms with supporting documentation. It had not applied for advance assurance that it met the conditions for enterprise investment scheme (EIS) relief so HMRC asked for additional information which the taxpayer provided.

The documents explained that the horses would be kept at a third party stud for a cost of £8 670 a horse a year. The First-tier Tribunal was bemused at the ‘very sketchy financial information’ which it also found 'inaccurate’.

The taxpayer had no long-term detailed financial forecasts nor did it have a business plan.

HMRC refused to issue the EIS certificates because the risk...