Skye Inns Limited and Mr Chris O Richards v Commissioners for Her Majesty's Revenue and Customs
Decision date: 15 December 2009
Neutral citation: Neutral citation not available
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
This appeal concerned whether 80% of a £1,536,684 subscription by Mr Richards to Skye Inns Ltd on 18 December 2001 had been "employed in the qualifying trade" by 17 December 2002 for EIS relief. The tribunal found the subscription proceeds were not so employed: cash earmarked for an uncontracted acquisition and large deposits held for future losses/improvements did not qualify as employed within the 12‑month period. The appeals were 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: high
Funds raised by a share issue are "employed in the business" only when they are actually applied to realistic net increases in trading assets or are genuinely reserved to supplement the trade’s current receipts (for example to fund trading losses or to meet demonstrable current business requirements). Money merely earmarked for a contemplated acquisition does not count as employed unless the company is contractually bound to make the purchase (except possibly in truly exceptional factual circumstances).
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 judgment suggests, as non‑binding commentary, that in an extreme case where a binding contract to acquire assets existed and completion was prevented by the counterparty, earmarked cash might be treated as employed. It also indicates that no rigid short‑term (e.g. one month) rule applies to instant‑access deposits; the relevant period depends on the business’s factual cash‑flow needs.