UK and International Tax news
FTT Hears Case On Availability of EIS Relief
Wednesday 28th October 2026
The FTT has recently heard a case of whether a company met the conditions for EIS relief at the date of share issue and for the three year period after issue.
In My Club Web Services Ltd v HMRC [2026] UKFTT 01417, the appeal concerned the continued availability of EIS relief in respect of shares issued by MCWS between 6 April 2018 and 31 October 2020. In April 2024, HMRC withdrew EIS relief previously granted in relation to those share issues, amounting to just over £1m. MCWS’s appeal was reviewed by HMRC which upheld its decision on February 2025.
The appeal raised two principal issues, the first being whether MCWS satisfied the “trading requirement” in s.181 ITA 2007 throughout the relevant qualifying periods, and the second being whether any qualifying business activity was carried on by the issuing company, or a qualifying 90% subsidiary, as required by s.183 ITA 2007. The parties agreed that the outcome of the appeal may differ between share issues depending upon the date on which any cessation of the statutory requirements occurred and the date on which the relevant qualifying period ended.
MCWS’s business involved the provision of technology and web services to sports clubs through its platform, whereby sports clubs could promote betting services to members and supporters and receive revenue generated through those arrangements. HMRC gave advance assurance for EIS purposes in March 2018. Between April 2018 and October 2020, MCWS issued shares in a number of tranches in respect of which EIS relief was subsequently claimed and granted. The parties did not dispute that, at the time the shares were issued, MCWS was carrying on a qualifying trade EIS purposes. The parties were agreed that the relevant qualifying periods for those share issues were determined in accordance with s.159 ITA2007 and ended on the third anniversary of the date on which each tranche of shares was issued. The earliest of the qualifying periods ran from 6 April 2018 until immediately before 6 April 2021, whilst the latest periods ran from 31 October 2020 until immediately before 31 October 2023.
If HMRC was correct and MWCS ceased to satisfy the relevant statutory requirements in January 2021, that conclusion would affect all of the share issues in dispute. If, however, those requirements continued to be satisfied beyond that date, the position may differ depending upon when any subsequent cessation occurred and the expiry date of the relevant period applicable to each share issue.
In January 2021, MWCS’s bank account with Metro Bank was closed by the bank, not at MWCS’s request. However, HMRC and MWCS disagreed as to the significance of that event and its effect on MWCS’s ability to satisfy the conditions for EIS relief.
In December 2022, HMRC commenced enquiries into MWCS’s continuing eligibility for EIS relief. Substantial correspondence followed between HMRC and MWCS’s advisers concerning its activities after January 2021 and the proper interpretation of the relevant statutory provisions.
In April 2024, HMRC issued a withdrawal notice with its position was that MWCS ceased to satisfy the trading requirement in s.181 ITA2007 following the closure of its bank account. During the course of the subsequent appeal process, HMRC also raised an issue concerning s.183 ITA 2007 and whether the qualifying business activity was carried on by MWCS itself.
The FTT advised that it had not been presented with extensive evidence of continuing commercial activity analogous to the tendering activity in Kirk or the identifiable plan for continuation of the business considered in Robroyston. Whilst MWCS retained assets and may have hoped to resume trading, there was limited objective evidence of continuing activity directed towards that end during much of the relevant period. The burden of proving the facts necessary to establish the appeal rested upon MWCS.
The FTT accepted that the involuntary closure of the bank account in January 2021 did not of itself demonstrate that MWCS ceased to satisfy s.181 and also accepted that efforts were made to secure replacement banking facilities and that contemporaneous evidence demonstrated such efforts continued until March 2021.
However, FTT opined that the evidence thereafter was materially different, with only very limited contemporaneous evidence concerning MWCS’s activities between March 2021 and August 2023. Whilst business assets were retained and some work may have been undertaken in relation to those assets, the evidence did not permit detailed findings regarding the nature, extent or commercial significance of those activities.
In the absence of substantial contemporaneous evidence, the FTT was unable to conclude that MWCS could demonstrate that it continued beyond March 2021 to exist wholly for the purpose of carrying on one or more qualifying trades. Given this, the FTT held that MWCS had not demonstrated continued satisfaction of the trading requirement in s.181 ITA 2007 throughout the relevant periods, and the appeal fell to be dismissed on that basis alone.
If you would like more information on this decision, please contact Keith Rushen on 0044 (0) 207 486 2378.
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