Coconut Animated Island Limited v The Commissioners for HMRC
Decision date: 23 August 2022
Neutral citation: [2022] UKFTT 303 (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
Coconut Animated Island Ltd appealed HMRC’s refusal to authorise SEIS certificates for shares issued 19 March–5 April 2018. The Tribunal found the company satisfied the risk-to-capital and IP “created” tests (it had long‑term growth objectives and commissioning/subcontracting plus payment vested exploitation rights), but held Condition A of the disqualifying‑arrangements test was met because a majority of funds raised went to a related CHF Group entity (CHFE). The appeal was therefore dismissed.
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: medium
Where a company commissions work from subcontractors, pays the invoices and vests exploitation rights in itself, that can amount to the company having “created” the relevant intangible assets for the purposes of s.195(4)/(5); and the risk‑to‑capital inquiry is an objective assessment of the company’s contemporaneous subjective objectives, taking into account the statutory AAA(3) factors without any single factor being determinative.
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 made non‑binding observations on interpreting the AAA(3) list — noting some circumstances are more probative of the second limb (risk of capital loss) and some subparagraphs aim to identify whether a company’s structure shows benefit to another group — and commented on practical issues of nominee rights attribution and fund‑structure interactions with SEIS/EIS limits, without these being determinative.