Flix Innovations v HMRC

In Flix Innovations v HMRC [2016] UKUT 301 (5 July 2016) the UT found that ordinary shares with a preferential right on a winding up did not qualify for EIS (enterprise investment scheme) despite bearing ‘the risk and reward of the company’s business’.

Following a reorganisation of the company its issued share capital had comprised ordinary shares with a preferential right on a winding up and deferred shares. The issue was whether the ordinary shares carried a preferential right to the company’s assets on a winding up for the purposes of ITA 2007 s 173(2)(aa). If they did the amounts subscribed on the shares did not qualify for EIS relief.

Flix accepted that the ordinary shares carried a preferential right to the company’s assets on its winding up. However it submitted that the words ‘carry any present or future preferential rights’ in s 173(2)(aa) should...