X-Wind Power Ltd v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 27 July 2017 |
| Neutral Citation | [2017] UKUT 290 (TCC) |
| Date | 27 July 2017 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2017] UKUT 0290 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
The Hon Mr Justice Arnold
Patrick Way QC, instructed by direct access, appeared for the appellant
Barbara Belgrano, instructed by the Solicitor to HM Revenue and Customs, appeared for the respondents
Income tax – Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) – Whether EIS compliance statement completed instead of an SEIS compliance statement a nullity – No – Whether company entitled to make supplementary claim under TMA 1970, s. 42(9) – No – Appeal dismissed.
In dismissing appeals against the decision ([2016] TC 05086) of the First-Tier Tribunal (FTT), the Upper Tribunal (UT) held that HMRC had been correct in refusing to accept a later SEIS compliance statement submitted by X-Wind Power Ltd (“the company”) to replace an erroneously submitted EIS compliance statement. It also held that the company could not correct that mistake by making a supplementary claim under TMA 1970, s. 42(9).
Shortly after the inception of the SEIS, the company made three issues of shares in respect of which the investors would have been entitled to claim either SEIS or EIS relief, provided that the necessary conditions were satisfied. One such condition was that, for either scheme, the company issue a compliance statement to HMRC so that HMRC could authorise the company to issue compliance certificates to the investors as evidence for their entitlement to relief.
Although the company intended that the investors should claim SEIS relief (which is more generous), it inadvertently submitted an EIS compliance statement (EIS1) to HMRC in respect of the first share issue, on the strength of which HMRC authorised the issue of EIS compliance certificates. When further eligible investments were made, the company submitted SEIS compliance statements (SEIS1). HMRC refused, under ITA 2007, s. 257DK, to authorise issue of SEIS compliance certificates on the grounds that a prior EIS investment had already been made. The company then submitted a SEIS compliance statement in respect of the first share issue purporting to replace the erroneous EIS compliance statement. HMRC refused to accept the replacement statement.
The company appealed to the FTT on the grounds that HMRC's refusal to authorise the issue of SEIS compliance certificates in respect of the first share issue was, by virtue of ITA 2007, s. 257EE, a decision disallowing a claim, thereby permitting the company to make a supplementary claim under TMA 1970, s. 42(9) to correct an error or mistake in the original claim. The FTT held that a compliance statement was not a claim and dismissed the company's appeal.
In its appeal to the UT, the company maintained that the FTT had been in error in so doing and advanced new grounds, namely that its erroneous EIS compliance statement was a nullity, since it had not intended that the investors should claim EIS relief.
On the nullity point, the UT was unable to accept the company's argument. It was clear from ITA 2007, s. 205(3)(b) that HMRC should be able to rely on the accuracy of a compliance statement and from ITA 2007, s. 207 that the company's intention did not prevent its providing a valid compliance statement.
On the supplementary claim point, the UT agreed with the FTT that a compliance statement was not a claim. It was a statement designed to enable a claim for relief to be made by investors. In any case, even if a compliance statement could be a claim, the replacement SEIS1 form was not supplementary to the original but intended to replace it entirely. Furthermore, a valid claim required to be quantified, and the statements did not permit claims to be quantified by their very nature.
The appeal was accordingly dismissed.
HMRC's refusal to allow the original mistaken statement to be replaced may seem a little harsh at first, and the company might have considered an application for judicial review. On the other hand, the company had been authorised to issue EIS compliance certificates, at which point the mistake must have come to light, if not before, and it was not until 12 months had passed before the company attempted to replace the original statement. The investors would also have been able to claim EIS relief, which, albeit less generous than SEIS relief, might still have been valuable.
[1] This is an appeal from a decision of the First-Tier Tribunal (Tax) (Judge Colin Bishopp) (“the FTT”) dated 10 May 2016 ([2016] TC 05086 dismissing an appeal by X-Wind Power Ltd (“X-Wind”) against decisions of the Commissioners of Her Majesty's Revenue and Customs (“HMRC”) to refuse to authorise the issue of compliance certificates for the purposes of the Seed Enterprise Investment Scheme (“SEIS”) and to refuse to permit X-Wind to replace a compliance statement that it had provided to HMRC in that connection.
[2] There is no dispute as to the facts, which can be shortly stated.
[3] X-Wind is engaged in the design and...
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