In Robert Ames v HMRC [2015] UKFTT 337 (7 July 2015), the FTT dismissed the taxpayer’s appeal against HMRC’s decision not to allow his enterprise investment scheme (EIS) relief claim.
Mr Ames had invested in shares eligible for EIS relief. Mr Ames had, however, not claimed the relief because he had no taxable income in the relevant year. He had then sold the shares at a profit and explicitly included details of the gain in his return including attachment of his EIS3 form.
HMRC had amended the return to include the gain, on the basis that the CGT exemption was only available if EIS relief had been claimed (TCGA 1992 s 150A).
Mr Ames submitted that this interpretation of s150 was ‘anomalous’ because Parliament had specifically inserted s 150A(3)(c) so that an individual could obtain full CGT exemption on disposal, despite having insufficient tax to utilise all of his EIS relief.
Referring to Lord Hoffmann’s eponymous article on ‘Tax Avoidance’ ([2005] BTR 197), the FTT noted that it could not ‘rectify the terms of highly prescriptive legislation in order to include provisions which might have been included but were not actually there’. Parliament had amended s 150A with the object of allowing investors to obtain the full CGT exemption, even where their low income tax liability prevented them from making full use of the EIS relief, but Parliament had not detached the CGT exemption from the EIS relief.
Furthermore, there was no ‘fundamental error’ or other flaw in the statutory provisions which linked EIS relief with the CGT exemption, so that the European Convention on Human Rights was not in play.
Finally, the FTT could not allow a late claim under TMA 1970 s 118(2) which relates to ‘anything required to be done’ and not to claims which are optional.
Why it matters: The FTT dismissed the appeal, despite finding the taxpayer transparently honest and having unhesitatingly accepted his evidence. The FTT noted that HMRC had the discretion to allow a late claim and pointed out that HMRC seemed to have failed to consider the personal information provided by the taxpayer; the fact that IR137 did not contain any explicit warning that a failure to claim EIS would block the CGT exemption; and, finally, Mr Ames’ record of careful compliance.
In Robert Ames v HMRC [2015] UKFTT 337 (7 July 2015), the FTT dismissed the taxpayer’s appeal against HMRC’s decision not to allow his enterprise investment scheme (EIS) relief claim.
Mr Ames had invested in shares eligible for EIS relief. Mr Ames had, however, not claimed the relief because he had no taxable income in the relevant year. He had then sold the shares at a profit and explicitly included details of the gain in his return including attachment of his EIS3 form.
HMRC had amended the return to include the gain, on the basis that the CGT exemption was only available if EIS relief had been claimed (TCGA 1992 s 150A).
Mr Ames submitted that this interpretation of s150 was ‘anomalous’ because Parliament had specifically inserted s 150A(3)(c) so that an individual could obtain full CGT exemption on disposal, despite having insufficient tax to utilise all of his EIS relief.
Referring to Lord Hoffmann’s eponymous article on ‘Tax Avoidance’ ([2005] BTR 197), the FTT noted that it could not ‘rectify the terms of highly prescriptive legislation in order to include provisions which might have been included but were not actually there’. Parliament had amended s 150A with the object of allowing investors to obtain the full CGT exemption, even where their low income tax liability prevented them from making full use of the EIS relief, but Parliament had not detached the CGT exemption from the EIS relief.
Furthermore, there was no ‘fundamental error’ or other flaw in the statutory provisions which linked EIS relief with the CGT exemption, so that the European Convention on Human Rights was not in play.
Finally, the FTT could not allow a late claim under TMA 1970 s 118(2) which relates to ‘anything required to be done’ and not to claims which are optional.
Why it matters: The FTT dismissed the appeal, despite finding the taxpayer transparently honest and having unhesitatingly accepted his evidence. The FTT noted that HMRC had the discretion to allow a late claim and pointed out that HMRC seemed to have failed to consider the personal information provided by the taxpayer; the fact that IR137 did not contain any explicit warning that a failure to claim EIS would block the CGT exemption; and, finally, Mr Ames’ record of careful compliance.
