Accountants’ ‘innocent error’ costs firm’s SEIS appeal
An accounting firm submitted the wrong form when applying for the seed enterprise investment scheme (SEIS), causing “significant financial consequences” for their client, GDR Food Technology.
WDM Chartered Accountants are the latest SEIS mishap victim, mirroring the mistake made by wind turbine manufacturer X-Wind Power, which had its appeal dismissed by a tax tribunal after inadvertently completing the enterprise investment scheme (EIS) form instead of the intended SEIS document – a mistake that is becoming increasingly common.
As with the X-Wind Power case, WDM requested HMRC withdraw their incorrect EIS application after realising that it too had made a “simple error”.
When HMRC refused WDM’s re-submitted SEIS compliance statement, GDR Food Technology appealed the decision. The gluten free food company contested that the EIS form was submitted by mistake, and presented emails contending that their shareholdings were structured to qualify for the more favourable SEIS relief.
Tax tribunal judge Jonathan Richards rejected this, deciding that the company’s intention was “imperfectly communicated to, or imperfectly understood by” their accountants, who used the EIS forms and referred to the scheme throughout, and in their cover letters, as ‘EIS relief’.
Dismissing the appeal, Richards said: “s257DK makes it clear that the “EIS investment” is regarded as complete when the company provides a compliance statement under s205 of ITA 2007. The section does not invite any consideration of whether or not HMRC subsequently authorise the issue of a compliance certificate.”
The company believed that since it discovered its mistake a month after HMRC authorised the initial EIS compliance certificate, it should be separated from the X-Wind Power case. However, Richards did not deem the length of time it took to discover the mistake relevant.
With this being the second public dispute regarding SEIS form confusion, WDM argued for some mechanism to correct an error when the wrong form has been submitted to HMRC.
While Richards expressed sympathy for the company, he reasoned that parliament has “not made any provision to relieve taxpayers who inadvertently submit the wrong form”. He added: “I agree with Judge Bishopp (the chamber president) in X-Wind Power that the legislation does not ask why a compliance statement under s205 ITA 2007 has been made; it simply asks whether it is has been made.”
What do you think? Is this an easy mistake to make? Should there be a mechanism in place to correct errors of this kind if an incorrect form has been submitted?