EIS1 - correcting an error

EIS1 - correcting an error

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I have just heard back from the HMRC that they cannot authorise my company to issue EIS certs. This is because the investors paid their subscriptions after the date that the subscription paperwork was signed/allotments made and the shares are required to be paid up at the time they are issued. However, the share register was not written up for several weeks after this and our lawyers maintain that legally the issue date is the date on which the register entry is actually made. I have spoken to HMRC and the case officer opined that the date of entry was meaningless, as it could happen at any arbitrary time - but he said for me to make a case and he would consider it. Can anyone suggest the best way of approaching this argument?
Jonathan Wilkes

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By kenmoody
18th Jun 2008 14:36

I suggest ...
... you refer the inspector to VCM 12200 which says quite clearly that shares are not issued until they are entered in the register of members. There is clear case law precedent on this: National Westminster Bank plc v CIR, 67 TC 1. The guidance also specifically says that the issue of a share certificate merely provides evidence of ownership.

A letter of allotment is just that.

I take it that this response is from the EIS unit, which is rather worrying given that they deal with all the claims now. I suspect you may be dealing with an inspcetor who is inexperienced on EIS. To state that entry in the register is 'meaningless' when in fact that is when, legally, the shares are issued clearly indicates a depth of ignorance.

I cross my fingers every time I give advice on EIS because it is so easy to fall into a trap. But this isn't one. There is no case for you to make out. The claim is within the law.

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