In Hunters Property PLC v HMRC [2018] TC06354 shares issued failed to qualify for EIS as the company controlled a company limited by guarantee, it was a subsidiary but the lack of share capital meant it was non-qualifying under the EIS rules. 

Hunters Properties (HP) issued shares intended to qualify for relief under the Enterprise Investment Scheme (EIS).

  • Previously it has acquired various business, Hunters Franchising Limited (HF) which owned Greenrose (G), a not-for-profit company limited by guarentee.
  • Two of HP's directors became the directors of G.
  • HMRC refused to give the HP authority to issue EIS3 compliance certificates, it said that HP controlled a company which was not a qualifying subsidiary and therefore failed the “control requirement” in section 185(1) ITA 2007, and  failed the “qualifying subsidiary requirement” in section 187 ITA 2007.
  • HP appealed on the basis that it did not control G, G had no shares and was therefore not a subsidiary, however if it did control G it was a subsidiary and a qualifying one.

The tribunal considered the control test relevant for EIS, s450(2) CTA 2010 and decided that HP had an indirect controlling interest: HF could remove board members and exert control.

On the subsidiary point it looked at the Companies Act decided that G was a subsidiary and having no share capital made no difference to that. However, as it had no share capital it could not be a '51%' subsidiary as required by the EIS leglisation.

The appeal was dismissed.


As the judgment notes, HMRC's view is that a company limited by guarantee “breaks a group”: a company must have issued share capital to be a qualifying subsidiary. Whilst it seems harsh that a wholly owned company can be at once a subsidiary but not a 51% subsidiary this is apparently little case law, and as this seems illogical at face value, perhaps we will see an appeal. 

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Hunters Property PLC v HMRC [2018] TC06354