The transaction took place within the three-year period during which certain requirements must be met to avoid the forfeiture of the EIS relief initially granted. However, HM Revenue & Customs (HMRC) considered that the takeover by E Ltd of P Ltd resulted in the loss of EIS relief for the pre-existing shareholders in P Ltd. The appellants appealed.
The First-tier Tribunal (FTT) noted that EIS relief would be forfeited (under ITA 2007, s 185) if, within the relevant three-year period, P Ltd came under the control of another company, such as by becoming a 51% subsidiary. Furthermore, the EIS relief was to be wholly or partially withdrawn (under s 209) on a disposal of EIS shares within the relevant period.
However, if the conditions of s 247 (‘continuity of EIS relief where issuing companies acquired by new company) were satisfied, that section had the effect of nullifying the consequences of both a
