In East Allenheads Estates Ltd v CRC (2015) TC04513 the FTT dismissed a claim for Enterprise Investment Scheme (EIS) deferral relief: the company was not a qualifying company at the time of the investment.

  • The taxpayer company owned and operate a grouse shooting moor.
  • The lands were transferred from the personal ownership of the sole director and shareholder, Mr Herrmann, who retained the ownership of Allenheads Hall, a property used to provide luxury accommodation to clients of the business. Mr Herrmann did not live at this property.
  • Mr Herrmann put £6.5million into the company in July 2007, and claimed reinvestment relief.  
  • Most of this money was spent on improvements and luxury antiques and artwork for Allenheads Hall.
  • HMRC denied the claim, and after lengthy argument and counter argument, Mr Herrmann appealed to the First Tier Tribunal, citing amongst other things that the business was aimed at the ‘super-rich’ and the expenditure was therefore necessary to create an appropriate setting.

Decision

The Tribunal dismissed the appeal:

  • The significant expenditure on the Hall conferred a personal benefit on Mr Herrmann, and could not be viewed as forming part of the company’s wider purpose of carrying on a commercial trade. It could not therefore be considered to be solely existing for the purpose of carrying on such a trade.
  • Due to the first finding, it could not be said that the shares had been issued to raise money for a qualifying trade.
  • It would not be possible, given the above, to accept that the money had been employed for a qualifying purpose within the requisite time limit.

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