A company’s ‘B’ shares were held to carry a preferential right to dividends (within ITA 2007, s 173(2A)) and tax relief was precluded under the enterprise investment scheme.

The appellant carried on a business of providing hybrid mail solution services to businesses. The appellant wished to issue ‘B’ shares for a total subscription of £400,000 to investor shareholders to raise investment. The appellant also wished to provide enhanced protection to the ‘B’ shares and ‘B’ shareholders compared to the existing ‘A’ shares and ‘A’ shareholders. 

The appellant wanted to ensure that subscriptions for the ‘B’ shares would benefit from tax relief under the enterprise investment scheme (EIS). In August 2014, the appellant applied for advanced assurance in respect of the EIS. In October 2014, HMRC confirmed that EIS authorisation would be provided if a