Question of control

Enterprise investment scheme relief claim

The taxpayer owned all the shares in HP which in turn owned HF. In May 2015 HF acquired the shareholding of a company limited by guarantee (G) and became its sole member. At the same time the director of G retired and was replaced with F and E who were also directors and shareholders of the holding company although they did not control it.

In April and May 2015 the taxpayer issued shares to investors. It submitted forms EIS1 declaring that it satisfied the requirements for enterprise investment scheme (EIS) relief. HMRC refused to issue certificates. It said the taxpayer controlled a company (G) which was not a qualifying subsidiary and therefore failed the control requirement in ITA 2007  s 185(1). Further because G was a non-qualifying subsidiary the qualifying subsidiary requirement in s 187 was not met.