Forthwright (Wales) Ltd v HM Inspector of Taxes, SPC 00383
| Jurisdiction | UK Non-devolved |
| Judge | Dr John Avery Jones CBE |
| Judgment Date | 29 September 2003 |
| Respondent | HM Inspector of Taxes |
| Appellant | Forthwright (Wales) Ltd |
| Reference | SPC 00383 |
| Court | First-tier Tribunal (Tax Chamber) |
ENTERPRISE INVESTMENT SCHEME – part of the money raised used to pay dividends including dividends paid to employees – whether shares issued to raise money for the purpose of a qualifying business activity – no – whether necessary for there to be a closure notice for certificate to be refused – no
FORTHRIGHT (WALES) LIMITED Appellant
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Special Commissioner: DR JOHN F AVERY JONES CBE
Sitting in public in London on 23 September 2003
Louise Rippon instructed by Hayvenhursts Limited, chartered Accountants, for the Appellant
Colin Williams, HM Inspector of Taxes, Appeals Unit Wales, for the Respondents
© CROWN COPYRIGHT 2003
DECISION
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This is an appeal by Forthright (Wales) Limited against the refusal by the Inspector to issue certificates to investors in the Appellant entitling them to claim enterprise investment relief pursuant to section 306 of the Taxes Act 1988. The Appellant was represented by Ms Louise Rippon and the Inspector by Mr Colin Williams.
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The issues in this appeal are first whether it is necessary for there to be an enquiry followed by a closure notice for the certificate to be refused, and secondly whether the issue of shares in the Appellant qualifies under the enterprise investment scheme, in particular whether the money raised was used for a qualifying business activity. The Inspector had considered that the appellant company was not carrying on a qualifying business activity on two grounds: that part of the funds were used to pay liabilities taken over when it acquired the trade, and part had been used to pay dividends. During the hearing the first point was conceded, leaving only the dividend point to be decided.
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There was a statement of agreed facts and issues as follows:
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The Appellant Company was incorporated on 23 February 1998.
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The Appellant Company acquired the trade and assets of Forthright Management Services Limited.
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The Appellant Company commenced trading in the United Kingdom on 3 April 1998 supplying management services to Bartons, Chartered Accountants, which is a qualifying trade for the purposes of the EIS relief provisions, on the same terms as previously used by Forthright Management services Limited.
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The liabilities taken over by the Appellant Company from Forthright Management Services Limited were:
Loan from P T Felman Management Services Ltd £69,446
Loan from Bartons Ltd £87,500
Bank overdraft £4,100
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On 3 April 1998 the Appellant Company made a share issue raising £299,998.
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These funds were used to pay or repay:
Trade expenses £81,350
Liabilities taken over from Forthright
Management Services Ltd £161,046
Dividends and advance corporation tax £57,602
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On 10 November 1998 the Appellant Company submitted Form EIS 1 tot eh Inland Revenue, requesting authority to issue certificates to the investors under the provisions of section...
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