Whenever an enterprise investment scheme (EIS) question comes into the office, I secretly hope one of my colleagues will pick it up before I do. It is one of the most difficult reliefs to manage, and there are elephant traps at every turn.

This week, we report on G Finn & others (TC4347), a case that shows how easy it is to fall foul of the rules.

The opening words of the judgment said it all:

“It might be expected that, where a company which satisfies the rules for issuing shares which qualify for relief under the enterprise investment scheme is taken over by another company which also satisfies those conditions by way of a share for share exchange, the shareholders in the target company who obtained income tax relief under the scheme in respect of their investment would not lose that relief.”

The appellants were therefore surprised in exactly these circumstances to receive notices of assessment withdrawing relief they had previously claimed.

The EIS is a classic case of tension between the desire of the government to promote particular activity (such as private investment in private companies) and the concern of HMRC to prevent the rules being exploited.

In this country, we have never worked out where the balance should lie and, as a result, we have failed to capture the full potential for investment.

I hope whatever government emerges after the election will have the creation of a truly effective investment relief high on its list of priorities.

Read paragraphs 13 to 17 of the First-tier Tribunal decision in Finn, and also paragraphs 18 to 25 of A Partnership (TC4358). The two cases dealt with different areas of the tax law but had one thing in common: who was the client?

It should be obvious, but it is surprising how often this creates problems: are you acting for the partners or the partnership; the trustees or the beneficiaries; the shareholders or the company?

When things go wrong, failure to get them right can create huge problems, as these cases show. Are your firm’s processes robust enough?

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