Transferring property for shares was not “raising money” for the purposes of the Business Expansion Scheme, the High Court has ruled. Although this Scheme was abolished in 1994, this provision has been translated into the current rules for the replacement Enterprise Investment Scheme, and so remains relevant.
The company transferred two houses to a qualifying company in return for shares. The issue for the court was whether transferring property came within the scope of “raising money” under Income and Corporation Taxes Act 1988 s289(1)(a).
The General Commissioners decided that the term “money” was broad enough to include property, which could easily have been first converted to cash. The term “cash” was more limited than the word “money”. Parliament had preferred to use the word “money”.
On appeal, the court agreed with Inland Revenue that s289 was clearly limited to shares sold for cash. Although there were some circumstances when the word “money” could be given a much wider meaning, there was nothing to indicate that s289 came within that scope.
Thompson v Hart. Ch D [2000]
[2000]