Roy Thomason(1) Richard Godwin(2) Andrew Markham(3) v Commissioners for Her Majesty's Revenue and Customs
Decision date: 17 November 2010
Neutral citation: [2010] UKFTT 579 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
The three appellants were employees of Oldco who became directors/shareholders of Newco; Newco bought Oldco’s trade on 25 Oct 2004 and later issued further shares on 25 Oct 2005 for which the appellants claimed EIS relief. HMRC denied relief under s 291A(5)(b)(ii) arguing the appellants had been “involved in carrying on” the same trade. The Tribunal held the relevant statutory test is to be applied at the time of the earlier share issue (15 Oct 2004), when Newco had not yet carried on the trade, so the condition was not breached and the appeal was allowed.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: high
The Tribunal decided that whether a subscriber was previously “involved in carrying on … the trade carried on by the issuing company” under s 291A(5)(b)(ii) must be assessed by reference to the time of the relevant earlier issue of eligible shares (here 15 Oct 2004); because Newco had not carried on the trade at that date, the statutory disqualification did not apply.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The Tribunal noted and did not accept HMRC’s broader contention that management buyouts as a class cannot qualify for EIS relief, but did not decide the point as a general proposition; it also observed that different factual patterns could lead to a contrary result under s 291A(5)(b)(ii).