EIS Reinvestment relief denied where the EIS company had multiple purposes
The tribunal found that although the EIS company carried on a qualifying trade for the purposes of the enterprise investment scheme, it also existed for other purposes that were neither an integral part of, nor incidental to, that trade and did not qualify under the scheme. The other purposes included investing in art and antiques and making improvements to a property that the company used for its trade but which was owned by its main investor, for the personal benefit of that investor. The purpose could not be incidental to the trade due to the extent of the improvements and the expenditure on art and antiques (including a £2.8 million Magritte painting), which was investment activity (and therefore not allowable expenditure under the EIS rules).
This case shows the strict application of the EIS trade purpose rules and the scrutiny that HMRC apply.
East Allenheads Estate Ltd v HMRC  UKFTT 0328 (TC)
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