In Oxbotica Limited v HMRC [2018] TC6538 HMRC was unsuccessful in an attempt to deny SEIS relief for £1,000 of founder shares on the basis that the amount of the investment was too small to be used to for any qualifying activity.

  • The company was formed as a university spin out company. Subscribers deposited funds with the company advisers and the company was formed.
  • It was agreed that the company 
  • The company was going to be undertaking qualifying activities for Seed Enterprise Investment Scheme (SEIS) relief, i.e. preparing to trade, carrying on Research & Development.
  • It claimed SEIS on certain subscription funds. As with any other SEIS company these would be added to its other funding which was spent on qualifying expenditure.

HMRC initially denied relief on the basis that the funds were used to pay legal fees. Having established that this was not the case, it then asserted that that the reason for the share issue was to derive a capital gain tax advantage.

Following a Statutory review of the original officer's decision HMRC decided that its best argument was deny relief on the basis that the moneys were being used to secure debt funding from the university and to possibly to secure future reliefs under SEIS for the 3 investors by acquiring qualifying shareholdings in the company. Finally, they denied relief on the basis that £1,000 was insufficient to fund the company. As the Appellant’s business was the development of software for autonomous vehicles HMRC contended that the £316 or even the £1,000 of which it formed part was not sufficiently large to allow the Appellant to carry on its chosen business.

On appeal the First Tier Tribunal (FTT) found no basis to HMRC’s approach, there is no de-minimis rule in the SEIS legislation and it was clear that whilst £1,000 was not enough on its own to fully fund the company’s activities, once pooled with other cash it formed part of the funding to start up the company and secure the university’s involvement and so was allowed for SEIS.


As the judge noted, ‘the Appellant was clearly aggrieved that what they considered to be a standard approach for spin out companies generally and specifically from the University had been challenged by HMRC.’ As we note, this seems to be a case of HMRC making up a new rule and then trying to stick to it.


Seed Enterprise Investment Scheme (SEIS)
A guide to seed investment relief for start-ups

Research & Development
Visit our R & D pages for comprehensive coverage of how and why and what to claim

Statutory review
A great idea that is becoming a bit of a joke: if HMRC make an assessment or a determination you can request a technical review by an officer who is independent of your case. In theory, this should weed out cases like the one above, i.e. ones where HMRC has accidently made up the law and is wrong. Practice shows that it might be easier to ask turkeys to vote for Christmas!

External link

Oxbotica Limited v HMRC [2018] TC6538


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