Background
The appellants challenged HMRC decisions denying enterprise investment scheme (EIS) relief for shares they issued. Each company installed a single UK residential rooftop solar panel, while intending through overseas subsidiaries to develop larger ground-mounted solar projects in Iberia. The First-tier Tribunal dismissed their appeals, finding that the EIS conditions had not been met.
The appellants sought permission to appeal on Ground 1, alongside other grounds already permitted by the First-tier Tribunal. Ground 1A challenged factual findings that the rooftop activity was not conducted commercially with a view to profit. Ground 1B contended that the First-tier Tribunal had improperly applied York’s factual circumstances to the other appellant companies.
The Court’s Holding
Judge Jonathan Cannan refused permission on Ground 1A. The Upper Tribunal held that the appellants had not shown an arguable error of law under the stringent standard for challenging findings of fact. The First-tier Tribunal was entitled on the evidence to find that the rooftop installations were not a viable profit-making business, were undertaken to initiate trading for EIS purposes, and were fundamentally different from the Iberian projects.
The Upper Tribunal granted permission on Ground 1B for the appellants other than York. Although the First-tier Tribunal had indications that it considered the other companies’ circumstances separately, its reasoning was not clear, including as to Warwick and Cardiff’s EPC contracts entered before the relevant deadline. That issue was realistically arguable, particularly given its overlap with the already-permitted grounds concerning the legal test for when a trade commences.
Key Takeaways
- A factual challenge must identify the material finding, relevant evidence, and why the tribunal was not entitled to make it.
- The First-tier Tribunal was entitled to treat the UK rooftop activity and Iberian solar projects as distinct rather than one trade.
- Permission was granted only on whether the First-tier Tribunal adequately considered the distinct facts of the non-York appellants.
Why It Matters
The decision illustrates the limited scope for reopening factual findings in tax appeals. Evidence that an arrangement was intended to satisfy EIS requirements does not compel a finding that the underlying activity was conducted commercially with a view to profit.
It also underlines the need for a tribunal deciding multiple related appeals to make clear how company-specific evidence has been addressed, especially where those facts may matter under the applicable legal test.