Income tax
EIS and commencement of trade
The First-tier Tribunal (FTT) has dismissed the taxpayers’ appeals in the enterprise investment scheme (EIS) case of York SD Limited and others. The case concerned whether new shares issued by six appellant group companies, to fund the businesses’ solar energy generation projects, met the statutory conditions to entitle individual shareholders to EIS’s income tax and capital gains tax reliefs. In particular, the FTT focused on whether the newly incorporated issuing companies had begun their planned trades within two years of the share issue (pursuant to sections 179 and 181, Income Tax Act 2007).
The decision summarises key case law, for example the similar September 2024 FTT EIS decision in the case of Putney Power Limited and another, and distils eight core principles from the authorities on determining whether and when a trade has commenced. Applied to the main projects of the appellants, and while agreeing that many key construction contracts had been entered into, the FTT inter alia found they were not “ready to face and find customers” before the deadline. The FTT states: “We consider that the business infrastructure must be in place and functional to support the trade. A business cannot be said to have commenced trading if it is still assembling the tools or facilities necessary to deliver its goods or services.” As a result of not meeting the trading requirement (and other EIS requirements), the appeals were dismissed.
York SD Limited & Ors v HMRC [2025] UKFTT 877 (TC)
From the Business Tax Briefing dated 1 August 2025, published by Deloitte
Property tax
Extension of Scottish lease not subject to LBTT
The First-tier Tribunal (FTT) for Scotland agreed with a taxpayer that the extension by minute of variation of a Scottish lease, first entered into under stamp duty land tax (SDLT), did not create a new lease under land and buildings transaction tax (LBTT).
The taxpayer entered into a lease on a property in Aberdeen in 2013 under the SDLT regime. LBTT replaced SDLT in Scotland on 1 April 2015. The taxpayer then extended the lease in 2020 by way of a minute of variation. Revenue Scotland treated the extension of the lease as the creation of a new lease for LBTT purposes, resulting in an LBTT liability. This decision was challenged by the taxpayer.
Under English law, the extension of a lease is treated as a surrender and regrant, creating a new lease. Under Scottish law the extension is just a continuation of the lease. The FTT for Scotland found that in this scenario, the extension by minute of variation did not create a new lease for LBTT purposes. There was therefore no LBTT liability. Revenue Scotland may appeal the decision.
Archer (UK) Limited v RS [2025] FTSTC 10
From Tax Update August 2025, published by S&W Partners LLP
Practical Points
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