Wild v Cannavan
| Jurisdiction | England & Wales |
| Judgment Date | 26 March 1996 |
| Date | 26 March 1996 |
| Court | Chancery Division |
Chancery Division.
Evans-Lombe J.
The taxpayer appeared in person.
Timothy Brennan (instructed by the Solicitor of Inland Revenue) for the Crown.
Income tax - Relief - Business Expansion Scheme - Individuals qualifying for relief - Individual not eligible if connected with relevant company at the "relevant time" - Individual connected with company if holding more than 30 per cent of issued ordinary share capital - Whether taxpayer who held more than 30 per cent of the share capital at some time during the relevant time eligible for relief - Income and Corporation Taxes Act 1988 section 289 subsec-or-para (12) section 291 subsec-or-para (1)Income and Corporation Taxes Act 1988, ss. 289(12), 291(1)(c).
This was an appeal from a decision of the general commissioners for Fylde that a taxpayer who held more than 30 per cent of the issued ordinary share capital of a business expansion scheme ("BES") company for part of the "relevant period" as defined by the Income and Corporation Taxes Act 1988 section 289 subsec-or-para (12)Income and Corporation Taxes Act 1988, s. 289(12) was not eligible for relief under Income and Corporation Taxes Act 1988 section 291 subsec-or-para (1)s. 291(1).
The issue was whether the taxpayer was disentitled to BES relief for 1986-87 because he was a "connected person" with regard to the company within Income and Corporation Taxes Act 1988 section 291 subsec-or-para (1)s. 291(1)(c) of the Act because, at some time during the "relevant period" of five years specified in Income and Corporation Taxes Act 1988 section 289 subsec-or-para (12)s. 289(12) since he possessed more than 30 per cent of the issued share capital of the company (Income and Corporation Taxes Act 1988 section 291 subsec-or-para (4)s. 291(4)).
The taxpayer contended that the wording of the statute was ambiguous. It could mean that an individual was disqualified from relief if he was connected with the company at any time during the relevant period. It could equally mean that he qualified for relief if at any time in the relevant period he was not connected with the company.
The court also considered whether it had jurisdiction to hear the appeal if the inspector had refused to authorise a BES certificate pursuant toIncome and Corporation Taxes Act 1988 section 306 subsec-or-para (2)s. 306(2). The company did not challenge that refusal because a liquidator had been appointed and the company had subsequently been dissolved.
Held, dismissing the taxpayer's appeal:
1. Income and Corporation Taxes Act 1988 section 291 subsec-or-para (1)The Income and Corporation Taxes Act 1988, s. 291(1)(c) could only be read as meaning that a taxpayer who at any time during the relevant period, as defined by Income and Corporation Taxes Act 1988 section 289 subsec-or-para (12)s. 289(12), possessed either directly or indirectly, or became entitled to acquire, more than 30 per cent of the issued share capital of the company was a "connected person" within Income and Corporation Taxes Act 1988 section 291s. 291 and was disentitled to relief.
2. To claim BES relief it was necessary to obtain a certificate under Income and Corporation Taxes Act 1988 section 306 subsec-or-para (2)s. 306(2). That was a matter for the company which must obtain authority from the inspector. It might be technically correct that only the company was entitled to challenge a refusal by the inspector to authorise a certificate so that the court had no jurisdiction to reverse such a refusal on an appeal by the individual claimant. However, if the court had decided the substantive question in favour of the taxpayer, the case would have been stood over for a certificate to be authorised.
1. At the meeting of the commissioners for the general purposes of the income tax Acts for the Division of Fylde on Tuesday 10 January 1995 H Wild (the taxpayer) appealed against the inspectors' refusal to allow him BES relief for 1986-87 on an investment of £40,000 in a company named Fibrelon Ltd.
2. The question for determination was whether the taxpayer fails to qualify for relief on the grounds that he was connected with the company within the terms ofFinance Act 1983 schedule 5 subsec-or-para 4Sch. 5, para. 4(1) of the Finance Act 1983 during the relevant period under Finance Act 1983 schedule 5 subsec-or-para 2Sch. 5, para. 2(7) (subsequently consolidated as Income and Corporation Taxes Act 1988 section 291 subsec-or-para (1) section 291 subsec-or-para (4) section 289 subsec-or-para (12)ss. 291(1), 291(4) and 289(12) of the Income and Corporation Taxes Act1988).
3. The taxpayer appeared in person. The inspector was represented by Mr DE Griffiths, deputy district inspector.
4. We accepted the following facts which were agreed by the parties:
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(1) Chronology of events
25/06/1986
Epicway Ltd was incorporated. Start of relevant period (s. 289(12) of the 1988 Act).
15/07/1986
Change of name to Fibrelon Ltd.
03/04/1987
40,000 ordinary shares issued to the taxpayer.
05/11/1987
Claim to BES relief made by the taxpayer on his tax return form.
23/12/1987
Company commences trading.
29/01/1988
Company informs inspector that it proposes to raise £350,000 by way of BES issue and that its ISC as at 29 January 1988 is £225,001.
13/09/1988
Inspector writes to company stating that the taxpayer's investment does not qualify for relief.
12/05/1989
Inspector writes to company's agent stating that he cannot authorise relief for the taxpayer.
19/08/1991
Liquidator appointed.
03/04/1992
5th anniversary of issue of shares. End of relevant period (s. 289(12) of the 1988 Act).
08/01/1993
Company dissolved.
02/08/1994
Inspector refuses the taxpayer's claim to BES relief.
23/08/1994
Taxpayer enters appeal.
(2) Relevant period
(2) It is agreed that the "relevant period" for the purposes ofIncome and Corporation Taxes Act 1988 section 289 subsec-or-para (12)s. 289(12) of the 1988 Act is 25 June 1986 to 3 April 1992.
(3) Proportion of shares owned
(3) Between 3 April 1987 and 2 October 1987 the taxpayer possessed 40,000 of the 40,002 issued shares, equivalent to 99.995 per cent. Between 2 October and 8 October 1987, 84,000 further shares were issued to 19 individuals. Following this the taxpayer possessed 40,000 of the 124,002 issued shares, equivalent to 32.26.
(3) On an unknown date between 8 October 1987 and 12 January 1988, 16,000 shares were issued to Taylor and Johnson Ltd. After this the taxpayer possessed 40,000 shares out of 140,002 issued shares, equivalent to 28.57. As at 25 July 1988 when the inspector received forms BES1, and as at 13 September 1988 when he notified the company of his decision not to authorise issue of a BES 3 certificate in respect of the 40,000 shares issued to the taxpayer held 40,000 of 343,902 issued shares, equivalent to 11.63.
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Wild v Cannavan
...(1)Income and Corporation Taxes Act 1988, s. 291(1)(c). This was an appeal by the taxpayer from a judgment of Evans-Lombe J ([1996] BTC 334) dismissing his appeal from the determination of general commissioners for Fylde that if an individual was at any time in the relevant period connected......