Judgment summary
This appeal concerned whether My Club Web Services Ltd continued to satisfy the Enterprise Investment Scheme (EIS) trading requirement in section 181 Income Tax Act 2007 (ITA 2007) throughout the relevant qualifying periods for shares issued between 6 April 2018 and 31 October 2020 (1).
HMRC had issued a withdrawal notice on 3 April 2024 under section 234(3)(b) ITA 2007 and paragraph 16 of Schedule 5B Taxation of Chargeable Gains Act 1992, withdrawing EIS relief of £1,049,985 (2). The Tribunal also considered, but did not need to determine, whether the separate requirement in section 183 ITA 2007 was met (4, 85-87).
The Tribunal dismissed the appeal, finding that the Appellant had not demonstrated, on the balance of probabilities, that it continued to exist wholly for the purpose of carrying on a qualifying trade throughout Period B beyond 26 March 2021 (83-84, 88).
Background
The Appellant was incorporated on 2 April 2013 as The Betting Service Limited, later became MyClubBetting.com Limited, and changed its name in August 2024 to My Club Web Services Limited (12). Its business involved providing technology and web services to sports clubs, enabling them to promote betting services to members and supporters and receive revenue from those arrangements (13).
HMRC gave advance assurance for EIS purposes on 13 March 2018, and between 6 April 2018 and 31 October 2020 the Appellant issued shares in tranches for which EIS relief was claimed and granted (14). It was not disputed that the Appellant was carrying on a qualifying trade at the time the shares were issued (14). The relevant qualifying periods, referred to as 'Period B', were determined under section 159 ITA 2007 and ended on the third anniversary of each share issue, with the earliest Period B running from 6 April 2018 to immediately before 6 April 2021 and the latest from 31 October 2020 to immediately before 31 October 2023 (15, 17).
On 3 January 2021 the Appellant's bank account with Metro Bank was closed by the bank, not at the Appellant's request (19). In December 2022 HMRC commenced enquiries into the Appellant's continuing eligibility for EIS relief, followed by correspondence with the Appellant's advisers (20). On 3 April 2024 HMRC issued the withdrawal notice, taking the position that the Appellant ceased to satisfy the trading requirement in section 181 ITA 2007 following closure of the bank account; HMRC also later raised an issue under section 183 ITA 2007 during the appeal process (21). Following an internal review upholding the decision on 6 February 2025, and an unsuccessful ADR process, the Appellant appealed to the Tribunal on 5 March 2025 (3, 22).
Core dispute
The central issue was whether the Appellant satisfied the trading requirement in section 181 ITA 2007, namely that the company, ignoring incidental purposes, existed wholly for the purpose of carrying on one or more qualifying trades, throughout the relevant Period B for each share issue (4, 30-31).
A secondary issue was whether, if the trading requirement was met, the qualifying business activity was carried on by the issuing company or a qualifying 90% subsidiary as required by section 183 ITA 2007, given work said to have been undertaken by Mr Weight and the involvement of another entity, My Club Europe plc (4, 53-56, 86).
The parties agreed that the outcome might differ between the various share issues depending on when, if at all, the statutory requirements ceased to be satisfied relative to the expiry of each tranche's Period B (5, 18).
Court findings
The Tribunal first refused the Appellant's late application to rely on a supplementary bundle, applying the Martland principles, on the basis that the documents concerned matters already in issue and no satisfactory explanation was given for the delay (6-11).
On the substantive issue, the Tribunal accepted that the involuntary closure of the Metro Bank account on 3 January 2021 did not of itself show that the Appellant had ceased to satisfy section 181, and that efforts to obtain replacement banking facilities continued until correspondence dated 26 March 2021 (40-43, 62, 78). However, the Tribunal found only very limited contemporaneous evidence of the Appellant's activities between 26 March 2021 and August 2023, with no director giving evidence and no board minutes, business plans or banking correspondence from that period produced (44-46, 63-66).
The Tribunal considered the meeting summaries, Mr Weight's work, and the November 2022 letter stating the Appellant was 'not currently trading', giving each limited weight given gaps in the evidence and the absence of director testimony (48-60). Applying principles from Kirk & Randall Ltd v Dunn (1924) 8 TC 663, Robroyston Brickworks Ltd v CIR (1976) 51 TC 230 and Goff v Osborne & Co (Sheffield) Ltd (1953) 34 TC 441, the Tribunal held that the key question was whether objective evidence showed a continuing trading purpose, rather than mere assertion of intention (72-76).
The Tribunal concluded that the burden of proof rested on the Appellant and that, in the absence of sufficient objective evidence, the Appellant had not shown it continued to meet section 181 beyond 26 March 2021, a date which fell within even the earliest Period B (77, 81-84). Because this finding was determinative, the Tribunal expressed no concluded view on the section 183 issue (85-87).
Outcome
The appeal was dismissed (88).
The Tribunal held that the Appellant had not demonstrated that it continued throughout the relevant Period B, beyond 26 March 2021, to exist wholly for the purpose of carrying on one or more qualifying trades, so the trading requirement in section 181 ITA 2007 was not met for any of the share issues in dispute (83-84).
The parties were notified of the right to apply for permission to appeal within 56 days under Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (89).
Major issues / areas of contention
- Whether the Appellant met the trading requirement in section 181 ITA 2007 throughout the relevant Period B for each share issue
- If not, the date on which that requirement ceased to be satisfied
- Whether, if the trading requirement was met, the Appellant also satisfied the issuing company requirement in section 183 ITA 2007 (not ultimately determined)
- The consequential effect of these findings on the various share issues made between 6 April 2018 and 31 October 2020
- Whether the Appellant should be permitted to rely on a late supplementary evidence bundle