Another accountant has made a costly mistake confusing the Seed Enterprise Investment Scheme (SEIS) with the closely-related Enterprise Investment Scheme (EIS).
A tax tribunal found that WDM Chartered Accountants made an error leading to ‘significant financial consequences’ for client GDR Food Technology by filing the details on EIS instead of SEIS forms with HM Revenue and Customs (HMRC).
The wrong compliance form error was repeated in another recent SEIS case – X-Wind Power v HMRC.
The accountant completed the forms, had them signed by a GDR director and sent them to a tax office requesting EIS approval for a SEIS scheme.
Within a month, the mistake was realised and asked HMRC to cancel the EIS application as a result.
Wrong application for tax relief
A new application was filed on SEIS forms so investors could benefit from the advantageous tax breaks, but HMRC rejected the paperwork even though the accountant disclosed emails with GDR to argue the EIS application was lodged by mistake.
GDR appealed the decision, but the tax tribunal dismissed the case.
The chairman, Jonathan Richards explained that the accountant may have misunderstood instructions from the company but referred to the case throughout as an EIS application.
“The law makes clear that an EIS investment is complete when the company provides a compliance statement under section 205 of the Income Tax Act 2007. The section does not invite any consideration of whether or not HMRC subsequently authorise the issue of a compliance certificate.”
Costly mistake
He also pointed out that no time limit was imposed by the law, so finding out a mistake had been made relatively quickly did not alter the facts.
“Parliament has not made any provision to relieve taxpayers who inadvertently submit the wrong form,” he said.
“I also agree that the legislation does not ask why a compliance statement under section 205 of the Income Tax Act 2007 has been made; it simply asks whether a compliance statement has been made.”
SEIS allows investors to claim income tax relief of up to 50% of the value of their investment, which was £42,856 in the GDR case. EIS relief on the same investment is a 30% of tax paid.
