Trade was not commercial for the purposes of the enterprise investment scheme

The taxpayer held the intellectual property for the stories that became a children’s TV series called Pip Ahoy! After some successful enterprise investment scheme fundraisings the taxpayer issued 12 tranches of shares between May and November 2018. It submitted the EIS 1 compliance statements for permission to issue compliance certificates to investors to enable them to claim income tax relief on their investments. HMRC refused permission saying the company was not carrying on a qualifying trade. The taxpayer appealed.

The First-tier Tribunal found that the taxpayer was exploiting the intellectual property that it owned to develop into an animated TV series monetised by licensing to broadcasters and merchandising agreements for toys. Further these activities amounted to a trade carried on by the taxpayer at the time of the share issues.

On whether the trade was conducted on a commercial basis with a view to...