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Share issue was subject to disqualifying arrangements

By Mark McLaughlin, March 2025

The First-tier Tribunal did not make errors of law in deciding that arrangements for the issue of shares by the appellant were ‘disqualifying arrangements’ for enterprise investment scheme relief purposes as funds raised by the share issue were paid to or for the benefit of a ‘relevant person’. 

The appellant company was incorporated to exploit intellectual property in a pre-school animation project. A dispute arose with HM Revenue and Customs (HMRC) over whether certain shares issued were eligible as enterprise investment scheme (EIS) shares (under ITA 2007, Pt 5). HMRC considered that the arrangements for issuing the shares were ‘disqualifying arrangements’ because ‘Condition A’ (in ITA 2007, s 178A) was not met. Condition A stipulated that arrangements were disqualified if all or most of the funds raised by the share issue were paid to or for the benefit of a relevant person. The First-tier Tribunal (FTT)

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