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Risk to capital requirement: HMRC’s cases flop

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Two film industry companies used SEIS and EIS to raise funds, but HMRC asserted that the companies did not meet the risk to capital requirement.

5th Aug 2022
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Since my article regarding HMRC’s pyrrhic victory in their case against CHF PIP, it has now brought two further cases to the first tier tribunal (FTT) focused on the risk to capital requirement. This is a feature of both the seed enterprise investment scheme (SEIS) and the enterprise investment scheme (EIS).

Cry Me a River Ltd (TC8507) used the SEIS and Inferno Films Ltd (TC8472) used the EIS to raise funds, but the legislation is the same for both schemes. The companies in both cases are in the film industry. Also in both cases HMRC asserted that the companies did not meet the risk to capital requirement, but HMRC lost on that argument at FTT.

It is worth setting out what the risk to capital requirement says:

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By Hugo Fair
05th Aug 2022 17:36

Not my area but ... hold the front page ... my sympathy is entirely with HMRC in these cases!

A simple change to the law would have the required (or at least intended) effect:
* make one of the conditions that film companies have to be making their 2nd (or later) film with a cost-base of at least 75% of the film for which the application of a scheme is being claimed.

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