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The Importance Of Getting Your Paperwork Right

And the consequences of getting it wrong ...



The importance of getting your paperwork right when dealing with HMRC was confirmed in the recent Upper Tribunal decision in HMRC v X-Wind Power Limited, which didn't end well for the company ...

Getting your paperwork right is all important when dealing with HMRC, or this could happen!

Getting your paperwork right is all important when dealing with HMRC, or this could happen!

copyright: cherezoff / 123rf stock photo

When the newly formed X-Wind raised funds under the Seed EIS (SEIS), it intended to submit the SEIS compliance statement to HMRC enabling its investors to claim 50% income tax relief on their investment, CGT exemption and permanent CGT rollover relief on gains.

"However, a paperwork error meant that the company submitted an EIS compliance statement as opposed to an SEIS one!"

An innocent error, that to most, would be easily corrected by writing to HMRC and attaching the correct form. However, once the mistake was identified, HMRC refused to allow X-Wind to withdraw the EIS form and submit an SEIS form instead.

This created the double problem that the existing investors did not get the relief that they were anticipating, and no new investors could claim relief under SEIS as relief is not available under SEIS for a company that has raised funds already under EIS.

The company appealed, but the tax tribunals have upheld HMRC's stance. The tribunal expressed sympathy for the company's position that it was a simple clerical error and that it was unfair that such an unfavourable result of some magnitude should arise because of this.

"However, there was no mechanism within the legislation allowing a company to withdraw an incorrect EIS compliance statement!"

This is one of two cases involving the incorrect paperwork being completed for the purposes of claiming SEIS and both have been dismissed on similar grounds.

Whilst this is an unfortunate case, it does highlight the importance of submitting the correct paperwork when investors are expecting EIS and SEIS relief. There was no question that had the correct paperwork been submitted originally, the claim would have been accepted.

"Would you like to know more?"

If you are looking to raise funds under either the SEIS or EIS, call me on 01908 774323 or click here to ping me an email and let's see how I can help you.

Until next time ...


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More about Helen Beaumont ...

Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.

Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.

When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.