The appellants subscribed for shares in a company (P) in 2009 and 2010, and obtained income tax relief under the enterprise investment scheme (EIS) in respect of the amounts they had invested.
The management of P decided to seek a listing on the alternative investment market (AIM). In order to do this quickly and at lower cost, P identified an existing AIM listed company (E), and entered into a ‘reverse takeover’ (i.e. where the weaker company takes over the stronger company, but where the shareholders, management and business of the combined group is principally that of the stronger company). In December 2010, E acquired all the shares in P through a share-for-share exchange.
HM Revenue and Customs (HMRC) subsequently wrote to P stating that its shares were no longer eligible shares for EIS purposes. The EIS legislation (ITA 2007, s 185(2)(a)(i)) denies relief if, at any time within the three-year period from the
