In Nigel Bell v HMRC [2016] TC04969 a director failed to secure EIS relief: some shares were not issued in time. Another case where HMRC failed to make a valid discovery assessment.

  • Mr Bell made five tranches of investments in shares under the Enterprise Investment Scheme (EIS) in Applied Design Engineering Limited between 2008 and 2013 and he was made a director in the company in February 2008. 
  • HMRC openned enquiries and made assessments for the years 2011/12 and 2012/13 and made a discovery assessment into 2010/11.
  • The taxpayer appealled.

EIS relief is given to director investors even when connected to the company provided that all the qualifying investment conditions are met, including also three specific conditions (A-C) under s169 ITA 2007 "directors qualifying for relief despite connection".

  • Condition C of s169 provides that an issue of shares will qualify for relief provided they are issued within a three year time limit. That limit is set by virtue of the date on which the individual becomes a director and so connected with the company.

The FTT found that the three year time limit elapsed for Mr Bell in January 2011 and his investments made after that date did not qualify for EIS relief.

The FTT found that HMRC, "failed to advance a positive, or indeed any, case in relation to the discovery assessment" and it allowed the taxpayer's appeal against a discovery for the 2010/11 year. 


The EIS rules are complex and it is essential to check that all conditions are met before making any investment. EIS relief exists for directors: this allows business angels to join company boards and offer their expertise without loss of tax relief.

It is interesting that HMRC had failed to make any case with regard to discovery assessment: an error on HMRC's part. In making its decision the FTT took into consideration the findings of the Upper Tribunal in Burgess & Anor v HMRC [2015] , a discovery case in which it was found that the FTT had erred in law when it had failed to note that HMRC had also failed to meet the conditions required in order to make a valid discovery assessment.

Further useful guides on this topic

How to appeal a decision of HMRC
Key steps in appealing a decision of HMRC.

How to appeal a tax penalty
Essential reading in cases were there are penalties too

Discovery assessment and time limits
How far HMRC can go back, what conditions must be met for a valid discovery

Penalties: Error in a return or document
How work out penalties for different forms of inaccuracies

External links

Nigel Bell v HMRC [2016] TC04969