Judgment summary
This is a decision of the Upper Tribunal (Tax and Chancery Chamber) on applications for permission to appeal against a First-tier Tribunal (Tax Chamber) decision released on 16 July 2025. The FTT had dismissed appeals by York SD Limited and other companies against HMRC decisions withdrawing enterprise investment scheme (EIS) relief on shares they had issued.
The FTT had already granted permission to appeal on several grounds (Grounds 2, 3 and 4) but refused permission on what was identified as Ground 1. The appellants renewed their applications to the Upper Tribunal. Permission on Ground 1 was initially refused on paper on 5 March 2026, and this decision follows an oral hearing of the renewed applications on 9 June 2026.
Judge Jonathan Cannan refused permission to appeal on Ground 1A, concerning challenges to the FTT's findings of fact, but granted permission on Ground 1B, concerning the FTT's alleged failure to consider the individual circumstances of appellants other than York.
Background
Each appellant installed a single rooftop solar panel in the UK, which was intended to 'start the EIS clock' and satisfy EIS requirements relating to commencing a qualifying trade (see [5]). From the outset, each appellant also planned to establish a wholly owned subsidiary in countries such as Spain and Italy to develop larger, ground-mounted solar projects (see [42]). In the event, the subsidiaries operated in Spain and Portugal, described as the 'Iberian solar projects' (see [5]).
The FTT found that the appellants failed to satisfy all the conditions and requirements for EIS relief, including the 'purpose of the issue' requirement in section 174 ITA 2007, the 'trading requirement' in section 181, and the 'minimum period requirement' in section 176. These requirements involve establishing a qualifying business activity (QBA), defined by section 179, which must include commencement of a qualifying trade (defined by section 189) within 2 years of the share issue date, described as the QBA Deadline (see [4]).
The appellants argued, in the alternative, that they had commenced a qualifying trade either through their subsidiaries' steps towards constructing Iberian solar plants, or through a 'deemed group trade' combining the activities of each appellant and its subsidiary, given the UK rooftop panel installation (see [6]).
Core dispute
The core dispute before the Upper Tribunal concerned whether the appellants should be granted permission to appeal against the FTT's dismissal of their EIS relief appeals, on the grounds identified as Ground 1A and Ground 1B.
Ground 1A concerned whether the FTT made findings of fact it was not entitled to make on the evidence before it, applying the Edwards v Bairstow [1956] AC 14 standard as summarised in HM Revenue & Customs v Anna Cook [2021] UKUT 15 (TCC). The challenged findings related to whether the trade was conducted on a commercial basis with a view to profit by the QBA deadline, whether the single rooftop panel installation was commercially viable, and whether the installation was undertaken solely to meet EIS formal requirements (see [21]).
Ground 1B concerned whether the FTT, in reaching its conclusions, wrongly focused solely on the factual circumstances of York and failed to separately consider the different facts applicable to the other appellants, including the fact that Warwick and Cardiff had entered into EPC contracts before the QBA Deadline (see [35]-[36]).
Court findings
On Ground 1A, the Upper Tribunal held that the challenged findings were not primary facts but inferences drawn by the FTT from its primary findings, and that the appellants had not properly identified the evidence said to contradict those findings, as required by the approach in Georgiou (t/a Marios Chippery) v Customs and Excise Comrs [1996] STC 463 (see [24], [26]).
The Tribunal noted that Mr Hughes, in oral evidence, had acknowledged it would be difficult to argue that installing one rooftop panel was done to generate a profit, and that York obtained income of £9.20 per month against fixed assets of £3,650 (see [25], [33]). The Tribunal rejected the appellants' reliance on Inland Revenue Commissioners v Brebner [1967] 2 AC 18 by analogy, finding that an intention to meet EIS requirements did not mean the FTT was bound to find that requirement was in fact met (see [30]). The Tribunal was satisfied the FTT was entitled to make the findings challenged and that Ground 1A did not identify any arguable error of law with a realistic prospect of success (see [34]).
On Ground 1B, the Tribunal found there were indications the FTT had separately considered the different facts applicable to the other appellants, but the position was 'not as clear as it might have been', noting the FTT did not appear to deal with EPC contracts entered into by Warwick and Cardiff before the QBA Deadline (see [36]). Counsel for HMRC acknowledged that the separate consideration of the other appellants 'does not jump out' from the Decision (see [36]). The Tribunal was persuaded that Ground 1B was realistically arguable (see [37]).
Outcome
The Upper Tribunal refused permission to appeal on Ground 1A. It granted permission to appeal on Ground 1B to the appellants other than York (see [38]). Permission to appeal had already been granted by the FTT on Grounds 2, 3 and 4, which concern the correct legal test for when a trade commences, an issue also raised in the subsequent Upper Tribunal decision in Putney Power Limited v HM Revenue & Customs [2026] UKUT 105 (TCC).
Major issues / areas of contention
- Whether the FTT was entitled, on the evidence before it, to find that the UK rooftop solar panel activity was not conducted on a commercial basis with a view to profit by the QBA deadline
- Whether findings that the rooftop panel installation was commercially unviable and undertaken solely to meet EIS formal requirements amounted to findings the FTT was not entitled to make
- Whether the FTT wrongly based its conclusions for all appellants on the factual circumstances applicable to York alone, without separately considering the circumstances of the other appellants
- Whether the FTT failed to address evidence that Warwick and Cardiff had entered into EPC contracts before the QBA Deadline
- Whether the legislation incorporates a concept of a 'deemed group trade' combining the activities of an appellant and its subsidiary
- The correct legal test for when a qualifying trade commences, addressed separately under Grounds 2, 3 and 4 by reference to Putney Power Limited v HM Revenue & Customs