EIS and SEIS Relief Appeals: When HMRC Refuses or Withdraws Your Investment Relief

You backed a startup on the Enterprise Investment Scheme or the Seed Enterprise Investment Scheme—or you raised the round and issued the certificates yourself. You claimed the relief. The money is long spent. Now HMRC says the relief was never due, and it wants it back.

It is rarely just the income tax relief. Lose the EIS income tax relief and a capital gain you thought you had safely deferred springs back into charge. Lose the SEIS income tax relief and the capital gains exemption that came with it collapses too. Interest has been running the whole time. The gap is six figures, and it landed in one letter.

The founder, the adviser, or the promoter who arranged it has gone quiet. The structure that looked clever at the time is now the thing HMRC is attacking. And the letter gives you 30 days.

This guide explains what HMRC's letter means, why "but you gave us advance assurance" is the weakest thing you can say at the tribunal, the trap where a single wrong form destroys everyone's relief, the specific conditions HMRC fights over, and what to do in the time you have. Around 45% of tribunal appellants represent themselves. Nothing here is reserved for people with lawyers.

What HMRC's Letter Actually Means—And Which Of Two People You Are

EIS and SEIS disputes are uniquely confusing because there are two completely different appellants, with two completely different appeals, often arguing about the same share issue.

Get this wrong and you waste the 30 days. So before anything else: which of these two people are you?

• The company. You raised money under EIS or SEIS and applied to HMRC for authority to issue the relief certificates to your investors. HMRC has refused. Your appeal is about whether the share issue qualified.
• The investor. You put money into someone else's company, claimed relief on your own tax return, and HMRC has now amended your return, opened a discovery, or issued a special assessment taking the relief back. Your appeal is about your own self-assessment position.

These run on different statutory tracks. The conditions in dispute may overlap, but the appeals do not merge. One sentence to internalise now, because everything else flows from it:

If the company's authorisation fails, every investor's relief falls with it, and no individual investor can fix it alone. But an investor-specific failure—too large a stake, an employment problem—is personal to that investor and does not taint anyone else's relief.

That asymmetry decides who fights, who can help whom, and where the leverage is.

The Company's Letter: Refusal To Authorise Compliance Certificates [Company]

The relief reaches investors through a chain of forms. The company files a compliance statement—an EIS1 for EIS or an SEIS1 for SEIS—declaring that the share issue and the company meet the statutory conditions. HMRC, if satisfied, issues an authorisation (EIS2 / SEIS2) allowing the company to give compliance certificates (EIS3 / SEIS3) to its investors. The investors use those certificates to claim relief on their own returns.

The company's dispute is at the first link. HMRC refuses to authorise the company to issue certificates, or withdraws an authorisation, because it considers the share issue or the company did not qualify. That refusal is itself the appealable decision.

The statutory appeal route for the company is section 236 of the Income Tax Act 2007 for EIS—an appeal against a notice given under section 234(3)(b)—and section 257GA ITA 2007 for SEIS, against a notice under section 257FR(3)(b). This is the line of cases—Flix Innovations, Foojit, X-Wind, Innovate, Fashion on the Block, Putney Power—that turns on the single question: did this share issue qualify?

The company's directors are usually the witnesses. The company's articles of association, share classes, and subscription agreements are usually the evidence. The company appeals that refusal to the First-tier Tribunal the same way any tax appeal is filed—a notice of appeal within the time limit—as set out in our guide to how to appeal to the tax tribunal.

The Investor's Letter: SA Amendment, Discovery, Or Special Assessment [Investor]

The investor's dispute is on the investor's own tax return, and it almost always arrives by one of three routes.

An enquiry and closure notice. HMRC opens a check into your return under section 9A of the Taxes Management Act 1970, then concludes it with a closure notice under section 28A TMA 1970 amending your self-assessment to remove the relief. The mechanics of enquiries and closure notices are covered in our guide to HMRC enquiries and closure notices.

A discovery assessment. Where HMRC missed the enquiry window, it may instead raise a discovery assessment under section 29 TMA 1970. Discovery has its own gateway conditions and time limits—four years as standard, six years for careless behaviour, twenty years for deliberate—explained in our discovery assessments guide. EIS and SEIS have a tailored time limit on top, covered below.

A special assessment. This is the route specific to EIS and SEIS. ITA 2007 section 235 (EIS) and section 257G (SEIS) allow HMRC to withdraw or reduce relief "by the making of an assessment to income tax for the tax year for which the relief was obtained." HMRC's own manual (VCM15010) states that withdrawal of relief is usually by special assessment, although a timely amendment to your self-assessment can be accepted instead. Which mechanism HMRC uses in your case depends on the facts and the timing—do not assume; read the heading on your letter.

Whichever route, the investor appeals through the standard self-assessment machinery under section 31 TMA 1970, with the deadline imposed by section 31A. A section 28A closure notice will be headed "Closure notice" or "Notice of conclusion of enquiry". A section 29 discovery assessment will be headed "Discovery assessment" or "Assessment of tax" and will state the year and the time limit relied on. A special assessment will refer to the withdrawal of EIS or SEIS relief. Read the heading carefully—it tells you which gateway HMRC has used and therefore which conditions you can challenge.

The time limit—and a 60-day duty that runs the other way. This is the tailored limit promised above. Under ITA 2007 section 237 (EIS) and section 257GB (SEIS), an assessment withdrawing or reducing relief may not be made more than six years after the end of the tax year for which the relief was obtained. That six-year limit is expressly "without prejudice to" section 36(1A) TMA 1970—so where HMRC alleges deliberate behaviour, the twenty-year window can still apply. There is also a duty pointing the other way. Under section 240 (the investor) and section 241 (the company), once you know of an event that causes relief to be withdrawn—the shares ceasing to be eligible, a disqualifying receipt—there is a duty to notify HMRC within 60 days. A failure to notify is itself a compliance failure that can attract a penalty and weaken a later "reasonable care" argument, so it matters even while you are still deciding whether to appeal.

The 30-Day Clock (Both Routes—Different Statutory Hooks)

Both appellants get 30 days. The hooks differ.

The investor has 30 days from the date of the closure notice, discovery assessment, or special assessment to appeal under section 31 TMA 1970.

The company has 30 days to appeal HMRC's refusal of authorisation under section 236 ITA 2007 (EIS) or section 257GA (SEIS).

Miss it and you are into a late appeal under the Martland three-stage test, where the length of and reason for the delay are weighed and the merits rarely rescue a long, unexplained slip. The framework is set out in Martland v HMRC [2018] UKUT 178 (TCC) and our late appeal to the tax tribunal guide. "My adviser was dealing with it" is, on the authorities, a weak excuse—see the penalties section below. Do not let the clock run while you wait for the promoter to call back. Calendar the date today.

The Personal Liability Trap [Investor]

If you are the investor, the relief is yours. So is the liability when it is withdrawn.

You cannot ringfence an EIS or SEIS clawback inside the company you invested in. The income tax relief was given to you; the assessment to take it back is raised on you; the revived capital gain is yours; any inaccuracy penalty under Schedule 24 FA 2007 is yours personally. The company's failure to qualify may be the cause, but the bill lands on the individual.

If the founder, the promoter, or your own adviser was negligent, that is a separate claim, in a different forum, on a different clock. The general limitation period for professional negligence is six years from the negligent act under section 5 of the Limitation Act 1980, or three years from the date you knew about the damage under section 14A, with a fifteen-year long-stop under section 14B. Those clocks run independently of the tribunal timeline, and they can expire while you are still arguing with HMRC. Negligence litigation sits outside the tribunal's jurisdiction and outside this guide—but flag any possible claim to a solicitor early, because preserving the option costs nothing now and may be lost later.

How EIS And SEIS Actually Work (And Why The Numbers Hurt)

To see why the numbers hurt, you have to see how many reliefs unwind at once.

The Reliefs: 30% / 50% Income Tax, Plus The CGT Layer

EIS gives an individual income tax relief at 30% of the amount subscribed for qualifying shares, on investments of up to £1 million a year (£2 million where the excess is invested in knowledge-intensive companies), under ITA 2007 section 158. On top of that, an EIS investor can defer a capital gain by reinvesting it into EIS shares, under TCGA 1992 Schedule 5B. The deferred gain is postponed, not eliminated—it is "treated as not having accrued" until a chargeable event brings it back.

SEIS gives income tax relief at 50% of the amount subscribed, under ITA 2007 section 257AB, on subscriptions of up to £200,000 in a tax year for shares issued on or after 6 April 2023 (the cap was £100,000 before). SEIS also carries a capital gains relief, but a different one: a reinvestment exemption under TCGA 1992 Schedule 5BB. Half of a matched reinvested gain is permanently exempt—not deferred, genuinely removed from charge.

That difference matters when relief is withdrawn. The EIS capital gains relief is a deferral that revives. The SEIS capital gains relief is an exemption that collapses. Either way, the capital gains layer is parasitic on the income tax relief: lose the income tax relief and the CGT relief unwinds with it automatically.

The Compliance-Statement Chain (EIS1/SEIS1 → EIS2/SEIS2 → EIS3/SEIS3)

The relief only reaches an investor through an unbroken chain of forms, and every link can break:

1. The company files an EIS1 (EIS) or SEIS1 (SEIS) compliance statement with HMRC, declaring the conditions are met.
2. HMRC, if satisfied, issues an EIS2 / SEIS2 authorisation.
3. The company issues an EIS3 / SEIS3 compliance certificate to each investor.
4. The investor claims the relief on their own self-assessment return, quoting the certificate.

HMRC's procedures for this chain are set out in VCM14020. The catastrophic failure mode is at step 1: a compliance statement, once validly submitted, cannot be withdrawn, replaced, or revoked—there is no statutory rectification route. A founder's clerical error at the top of the chain can destroy every investor's relief at the bottom of it. That is the wrong-form trap, and it has its own section below.

Worked Example: What Losing Looks Like

The reason the gap is six figures is that more than one relief unwinds, and interest has been running since the original due date. Take two investors in two different companies.

The EIS investor. You subscribed £200,000 for EIS shares and claimed 30% income tax relief—£60,000. You also deferred a £150,000 capital gain into the same shares under Schedule 5B. HMRC now withdraws the relief because the shares were not eligible.

• The £60,000 income tax relief is clawed back by special assessment.
• The £150,000 deferred gain revives—the shares ceasing to be eligible is a chargeable event under Schedule 5B paragraph 3, so the gain crashes back into charge in the year of the event. CGT on £150,000 follows, charged at the rates for the year the gain revives—the main rates are 18% and 24% for disposals and chargeable events on or after 30 October 2024, and which applies depends on the year and your other income.
• Interest runs on both. EIS clawback interest runs under ITA 2007 section 239 and section 86 TMA 1970, currently at 7.75% (the Bank of England base rate + 4%), from the relevant date—section 239 treats that as 31 January next following the tax year for which the assessment is made, so on a claim made several years ago the interest can already represent years of accrual.
• If HMRC says the inaccuracy was careless or deliberate, add a Schedule 24 FA 2007 penalty on top.

Income tax clawback plus revived CGT plus interest plus a possible penalty. The "£60,000 relief" headline was never the size of the problem.

The SEIS investor. You subscribed £100,000 for SEIS shares and claimed 50% income tax relief—£50,000. You also reinvested a £100,000 capital gain and claimed the Schedule 5BB exemption on half of it—£50,000 of gain treated as never chargeable. HMRC withdraws the SEIS relief.

• The £50,000 income tax relief is withdrawn under section 257G.
• The Schedule 5BB exemption collapses under paragraph 5—a chargeable gain accrues to you in the tax year the shares were issued. The £50,000 you thought permanently exempt is back in charge in that year.
• Interest runs from the relevant date in the same way—broadly 31 January following the tax year the charge relates to—so, as in the EIS example, it can already represent years of accrual.
• Add a Schedule 24 penalty if HMRC alleges careless or deliberate inaccuracy.

These are illustrative figures to show the shape of the exposure, not your numbers. The point is the multiplier: this is never a single tax. A Schedule 24 penalty, where one is charged, is a percentage of the tax at stake—broadly up to 30% for careless behaviour, 70% for deliberate, and 100% for deliberate and concealed—so it can be the largest line on the bill, not the smallest. The penalty bands are explained in our HMRC penalties explained guide, and interest in our interest on unpaid tax guide.

"But HMRC Gave Us Advance Assurance"

This is the instinct almost every reader has, and it is the single most important thing this guide has to disarm. It is also what separates EIS/SEIS from the rest of the entrepreneur-relief cluster: the reader's strongest emotional point is, in law, close to their weakest.

Why Advance Assurance Is Not Binding

Advance assurance is HMRC's pre-investment indication that, on the information the company provided, a proposed share issue looks likely to qualify. It is discretionary, non-statutory, and there is no right of appeal against the team's decision. HMRC's manual could not be clearer: assurance is given "based on the information provided by the company" (VCM60110; SEIS at VCM60210), and an advance assurance "does not guarantee that the investors are eligible to claim tax relief" (VCM60170).

HMRC is expressly not bound where the information given was inaccurate, misleading, or incomplete, where circumstances later changed, or where it was a different share issue from the one assured (VCM60140). At the statutory stage HMRC is bound only if the compliance statement actually matches the information on which assurance was given (VCM14020).

The cautionary tale is Foojit Ltd v HMRC [2021] UKUT 14 (TCC) (FTT below: Foojit Ltd v HMRC [2019] UKFTT 696 (TC)). Foojit obtained advance assurance, then issued A and B shares where the B shares carried a preferential right to 44% of distributable profits. HMRC refused authorisation. The Upper Tribunal held the preferential right was an excluded right under ITA 2007 section 173(2A)—on the proper construction of the bespoke articles read with the model articles, the relevant dividends could only become payable via a decision of the company or its shareholders or directors. EIS relief was unavailable. The appeal was dismissed despite the advance assurance. The decisions record no successful legitimate-expectation argument; the point was not run and decided in the tribunal.

The Legitimate-Expectation Forum Problem

When people say "but HMRC promised", what they are reaching for is a public-law argument called legitimate expectation—the idea that a public body should be held to a clear assurance it gave.

Here is the difficulty, and it is the reason this section exists. The general position is that legitimate-expectation challenges belong in judicial review in the Administrative Court, because the First-tier Tribunal has no general supervisory jurisdiction over how HMRC exercised its discretion—the tribunal decides whether the tax is right under the statute, not whether HMRC behaved unfairly. The precise boundary—when, if ever, the tribunal can entertain a public-law argument—is contested and beyond the scope of this guide. If advance assurance is central to your position, take specialist advice on the right forum before you spend your appeal arguing it. An FTT appeal built around "but you assured us" can fail not because the assurance was worthless to you commercially, but because the tribunal is the wrong place to run that argument.

When Advance Assurance Still Helps

Advance assurance is not useless. It helps where the company made full and accurate disclosure and the share issue actually carried out matched what was assured. In that situation the disclosure record can support the company's case that the conditions were met and can be a building block in a properly pleaded position.

The clearest illustration is Fashion on the Block Ltd v HMRC [2021] UKFTT 306 (TC), discussed in full under the wrong-form trap below. The company there held SEIS advance assurance, told HMRC of its error almost immediately, and its covering letter referred to the correct form. The assurance was part of a factual matrix that let the tribunal take a realistic view. The lesson is not "assurance saves you"—it is "full disclosure, matched by what you actually did, is worth something; a bare assurance you then departed from is not."

The Battlegrounds

Almost every EIS/SEIS dispute reduces to a single contested condition. HMRC's letter will hint at which one. Decode it before you draft anything—the condition in dispute dictates the evidence, the witnesses, and whether this is a company fight or an investor fight. This mirrors the decoder approach in our BADR appeals guide.

Company-Side Conditions

Preferential Share Rights [Company]

EIS and SEIS require ordinary shares that, broadly, carry no present or future preferential right to dividends whose amount or timing depends on a decision, and no preferential right to assets on a winding up. The relevant test is ITA 2007 section 173(2) and (2A).

This is the Flix / Foojit battleground. In Flix Innovations Ltd v HMRC [2015] UKFTT 558 (TC), one share class carried a preferential right to assets on a winding up; the FTT held the shares non-qualifying under section 173, and the Upper Tribunal upheld that in Flix Innovations Ltd v HMRC [2016] UKUT 301 (TCC). Foojit, above, applied the same strictness to a preferential dividend right. Growth shares, flowering shares, ratchets, and bespoke "alphabet" classes are the danger zone—the question is decided on the precise wording of the articles, read with the model articles, not on what the parties intended commercially. The answer turns on the documents.

Qualifying Trade / Excluded Activities [Company]

The company must carry on a qualifying trade. "Qualifying trade" is defined in ITA 2007 section 189, and a long list of excluded activities in sections 192 to 199 takes whole sectors out—including dealing in land or shares, financial activities, leasing, receiving royalties or licence fees, legal or accountancy services, property development, operating or managing hotels and care homes, and generating or exporting electricity. Where a substantial part of the trade is an excluded activity, the trade is not qualifying. This is fact-specific and turns on what the company actually did, not what its marketing said.

Risk-To-Capital Condition [Company]

Since 15 March 2018, both schemes require the risk-to-capital condition: ITA 2007 section 157A for EIS and section 257AAA for SEIS, both inserted by Finance Act 2018, section 14. Having regard to all the circumstances at the time the shares are issued, it must be reasonable to conclude that both:

• the company has objectives to grow and develop its trade in the long term; and
• there is a significant risk of a loss of capital greater than the net investment return (and the value of the EIS or SEIS relief itself is taken into account in working out that net return).

The statute lists circumstances HMRC may weigh—employee and turnover growth objectives, the company's sources of income, assets used to secure financing, sub-contracting arrangements, the ownership and management structure, and how the investment opportunity is marketed. HMRC uses this to attack capital-preservation structures: asset-backed, low-risk, or effectively guaranteed-exit arrangements dressed up as growth investment.

There is, candidly, very little tribunal authority directly on the post-2018 condition. Cry Me A River Ltd v HMRC [2022] UKFTT 182 (TC) touched the risk area in the company's favour on a film-script-development trade, but its facts (advance assurance sought in early 2015) predate the section 257AAA condition in its current form, so it is unlikely to be a clean authority on the modern test. Treat the modern condition as live and under-litigated rather than settled either way; the answer is fact-specific.

Age, Gross-Assets And Employee Limits [Company]

The company must satisfy several size and age limits at the relevant time. EIS has a permitted maximum age requirement (section 175A), a gross-assets requirement (section 186), and an employee-number requirement (section 186A). SEIS is tighter: under section 257DI the company's gross assets must not exceed £350,000 before the share issue, and under section 257DJ it must have fewer than 25 full-time-equivalent employees when the shares are issued. The amount that can be raised under SEIS is capped at £250,000 for shares issued on or after 6 April 2023 (it was £150,000 before) by section 257DL. These are bright-line numbers—they are either met on the documents on the relevant date, or they are not. Confirm the exact figure that applied to your share issue before you rely on any number; the answer turns on the documents.

Trade Not Yet Commenced In Time [Company]

A recurring company-side dispute is whether the trade had actually begun to be carried on by the statutory deadline, as opposed to the company merely getting ready to trade. This was the substantive issue across the conjoined appeals in Putney Power. The reported [2023] UKFTT 292 (TC) decision in that group (on BAILII) is a case-management ruling under Rule 18 on lead and related cases—not a substantive risk-to-capital decision, and it should not be cited as one. The substantive question was decided by the Upper Tribunal in Putney Power Ltd & Anor v HMRC [2026] UKUT 105 (TCC), where the FTT's approach was held to be flawed but the decision was remade to the same effect (HMRC succeeded; the trades had not begun in time). Because that decision is recent, treat the outcome as something to confirm rather than assume; the answer turns on the documents and the chronology.

The Wrong-Form Trap [Company]

This trap deserves its own weight, because it is the one place where a single typo by a founder or adviser can wipe out every investor's relief with no way back—and it catches people who did everything else right.

The rule comes from X-Wind Power Ltd v HMRC—FTT in 2016, upheld by the Upper Tribunal in X-Wind Power Ltd v HMRC [2017] UKUT 290 (TCC). The company filed an EIS1 by innocent error when it intended an SEIS1, then tried to substitute the SEIS1. HMRC refused. The tribunals held there is no provision anywhere in Part 5 or Part 5A of ITA 2007 for withdrawing, setting aside, replacing, or revoking a compliance statement, and the supplementary-claim mechanism in TMA 1970 section 42(9) does not help, because a compliance statement is not a claim. The wrong form, validly submitted, stood. SEIS was denied to every investor.

GDR Food Technology Ltd v HMRC [2016] UKFTT 466 (TC) was the same pattern and the same result. So was Innovate Commissioning Services Ltd v HMRC [2017] UKFTT 741 (TC), where the company had SEIS advance assurance and HMRC even queried the EIS1 and warned the company—but the company missed the warning (correspondence went to an old registered-office address) and the tribunal still applied X-Wind. An HMRC warning does not save a company that fails to act on it.

There is one narrow escape, and it is genuinely narrow. In Fashion on the Block Ltd v HMRC [2021] UKFTT 306 (TC) the FTT distinguished X-Wind and allowed the appeal. The facts that mattered were all present together:

• The company notified HMRC of the error almost immediately—within roughly 18 minutes of submission.
• It held SEIS advance assurance.
• Its covering letter referred to the correct form (SEIS1).
• There had been no prior EIS investment in the company.

On those facts the tribunal took a purposive and realistic view and held the unilateral mistake could be corrected. Read that list as a checklist, not a promise. If your facts do not line up with all of it, Fashion on the Block may not reach you—but the facts in your case may still matter. On the current authorities the position is severe. Before anyone concedes that investor relief is lost, get the compliance statement, the covering letter, the advance-assurance correspondence, and the timeline of when HMRC was told in front of someone independent. Do not advise the investors to give up, and do not assume the fight is winnable—the answer is fact-specific and turns on the documents.

Investor-Side Conditions

These are personal to the individual investor. A failure here taints that investor's relief only—it does not bring down the share issue for everyone else.

Connection / 30% Interest [Investor]

An EIS investor must not be "connected" with the company, broadly through holding more than 30% of the ordinary share capital, issued share capital, loan capital, or voting rights, or being able to control the company (ITA 2007 Part 5 Chapter 2). SEIS has its own substantial-interest test in section 257BF, again built around the 30% threshold. Connection is measured against the rules in the statute, including associates—it is easy to trip over by aggregating family or related holdings. This is fact-specific and turns on the share register and the connected-person rules.

Employee / Director Restrictions [Investor]

For EIS, being a paid director can be compatible with relief in limited, defined circumstances, but being an employee is generally not. SEIS is stricter: under section 257BA the investor must not be an employee of the company during the relevant period (a director can invest under SEIS, but the employee bar is hard). Founders who invest in their own SEIS company, and investors who later take a job there, are the typical casualties. The answer turns on the contractual and payroll documents and the timing.

Linked Loans, Pre-Arranged Exits, Tax Avoidance [Investor]

Relief is denied where there is a linked loan to the investor connected with the subscription, a pre-arranged exit, or arrangements a main purpose of which is tax avoidance. For EIS these run through the no-pre-arranged-exit and no-tax-avoidance requirements in sections 177 and 178; SEIS has parallel provisions including the no-linked-loan rule in section 257BD. HMRC often raises these where a "managed" EIS/SEIS product offered investors an effective floor or a planned exit. These are fact-heavy and turn on the full arrangement documents.

Burden Of Proof: Section 50(6) TMA Bites The Investor

On the investor's substantive appeal, the burden of proof is on you. Section 50(6) of the Taxes Management Act 1970 provides that the assessment or amendment stands unless the appellant satisfies the tribunal that it overcharges. If you cannot prove, on the balance of probabilities, that the conditions were met, you lose—HMRC does not have to prove they were not.

That shapes how grounds of appeal must be written. Generic complaints about fairness do not discharge a section 50(6) burden; condition-by-condition evidence does. The company's appeal and the investor's appeal need different grounds, because they contest different decisions on different facts. Our guide to writing grounds of appeal explains how to structure grounds against the section 50(6) burden.

The burden flips on penalties. Where HMRC seeks a Schedule 24 FA 2007 inaccuracy penalty, HMRC must prove the inaccuracy and the behaviour—that is the subject of the next section.

Penalties And The Promoter Who Has Gone Quiet

An EIS or SEIS denial can attract a Schedule 24 Finance Act 2007 penalty on the investor (and potentially on the company or the promoter) if HMRC argues the return was inaccurate through carelessness or deliberately. If HMRC alleges "deliberate", the 20-year discovery window under section 36(1A) TMA 1970 opens and the penalty range climbs sharply. The bands and behaviour categories are set out in our HMRC penalties explained and self-assessment penalties guides.

On penalties HMRC carries the burden. "Deliberate" is a subjective test—it requires an intention to mislead, as the Supreme Court held in HMRC v Tooth [2021] UKSC 17. An investor who relied in good faith on a promoter's certificate and claimed exactly what the EIS3 or SEIS3 said is a long way from deliberate.

Reasonable care is the live question for most investors, and it is fact-heavy. Reliance on a properly engaged adviser can support a reasonable-care defence, but Schedule 24 paragraph 18 makes clear that an agent's default does not by itself absolve the taxpayer—you must have taken your own reasonable care. The leading FTT formulations are David Collis v HMRC [2011] UKFTT 588 (TC) and Clynes v HMRC [2016] UKFTT 369 (TC); the general framework is in our reasonable excuse guide and the four-step approach in Perrin v HMRC [2018] UKUT 156 (TCC). Be wary of relying on "my adviser handled it" as a complete answer: the Katib line (HMRC v Katib [2019] UKUT 189 (TCC)) holds that an adviser's failings are generally attributed to the taxpayer. It limits the excuse; it does not extinguish a properly evidenced reasonable-care case.

If The Promoter Has Gone Quiet

The promoter or founder disappearing is both an evidential problem and a procedural one. The same disciplined steps used when an R&D consultancy goes silent—see our R&D tax credit appeals guide—apply here:

• Put requests in writing, by post and email, to every known address. Recorded delivery for the postal version, and keep the receipts. A documented trail of unanswered requests is itself part of the reasonable-care story.
• Ask HMRC for what was filed. You may not need the promoter's cooperation to find out what compliance statement and certificates were submitted in the company's name—request the file from the case officer.
• Check Companies House for the company's and promoter's status. A company or promoter in liquidation, dissolved, or struck off is not coming back; that changes who you can pursue and how. Search the Companies House register.
• Check professional bodies if the promoter claimed credentials. CIOT, ICAEW, ATT, and the SRA run public registers. Misrepresented credentials affect both your reasonable-care defence and any complaint.
• Send a letter before action for the working papers. A short, professional letter giving 14 days to provide the file sometimes shakes loose what email pleas do not.
• Preserve everything now. Old emails, attachments, subscription documents, the information memorandum, engagement letters. Disable any auto-archive that might delete them and export to a separate location. Both a reasonable-care defence and any negligence claim depend on contemporaneous evidence you may not be able to recreate.

If there may be a separate professional-negligence claim against the promoter or adviser, the limitation clock—six years from the negligent act under section 5 of the Limitation Act 1980, or three years from the date of knowledge under section 14A, with a fifteen-year long-stop under section 14B—runs independently of the tribunal timeline and can expire while the appeal is still live. That litigation is outside the tribunal's jurisdiction and outside this guide. Flag it to a solicitor early so the option is not lost by default.

How The Appeal Works

Statutory Review First?

When you appeal, HMRC offers a review by a different officer, completed within 45 days. The review is free and does not close off the tribunal route—you keep the right to notify the appeal to the tribunal afterwards. Across all dispute types, around 56% of reviewed decisions are cancelled or varied in the taxpayer's favour; that is an all-disputes figure, not an EIS/SEIS-specific one, so treat it as context, not a forecast.

Mirror the split used for BADR appeals. A statutory review can be worth using for a discrete legal point that can be decided on documents—for example, whether particular share rights fell within section 173(2A), or whether the wrong-form authorities apply on the facts as stated. Where the dispute turns on contested fact and witness evidence—what the company actually did, what the investor was told, the chronology of the error—a review is less likely to resolve it and the tribunal is where the evidence gets tested. Our HMRC internal review and settling your tax tribunal case guides cover the review and section 54 agreement routes.

Tribunal Appeal And Tracks

If you notify the appeal to the First-tier Tribunal, there is £0 to file—no fee. The general filing mechanics are in our how to appeal to the tax tribunal guide. EIS/SEIS appeals are usually categorised as Standard or Complex. A Complex case carries cost-shifting risk—the loser can be ordered to pay the other side's costs—unless you opt out of the costs regime in writing within 28 days of being told the case is Complex. That trade-off, and the tracks generally, are explained in tribunal tracks and costs.

Expect to give evidence. In a company appeal the directors are usually the witnesses; in an investor appeal the investor is. Our preparing for your tax tribunal hearing guide covers bundles and witness statements. These cases routinely go further than the FTT—Flix, Foojit, and X-Wind were all decided in the Upper Tribunal. The onward route, on a point of law only, is covered in after your tax tribunal decision and upper tribunal appeal. A typical timeline to a decision is typically 6-12 months.

Postponing The Tax

The tax shown on the closure notice, discovery assessment, or special assessment is due now unless you postpone it—and "the tax" includes both the clawed-back income tax and the revived Schedule 5B gain (or the collapsed Schedule 5BB exemption). Without postponement, interest accrues at 7.75% from the original due dates while you appeal.

Postponement under section 55 TMA 1970 is not automatic. You must apply in writing, identify the amount you say is overcharged, and give grounds for considering it overcharged. Make sure the application covers every strand—the income tax relief, the revived or collapsed capital gain, and any penalty—not just the headline income tax. Our postponing payment during appeal guide covers the mechanics; interest is in interest on unpaid tax.

What Evidence You Need On Day One

An EIS/SEIS appeal is won or lost on documents. Start pulling these now, while you can still get them:

• The company's articles of association and any shareholders' agreement—the source of any preferential-rights problem. Available from the company and from Companies House.
• The share-class structure, the share register, and SH01/SH02 filings—for connection, 30%, and preferential-rights questions. Companies House and the company's registers.
• The subscription agreement and any side letters—for pre-arranged-exit and linked-loan questions.
• The full compliance chain: EIS1/SEIS1, EIS2/SEIS2, EIS3/SEIS3—including the covering letters. If the promoter will not hand these over, ask the HMRC case officer for the file.
• The advance-assurance application and HMRC's response—central to any disclosure or Fashion on the Block-type argument. Pull the application, not just the favourable reply, because what was disclosed is the point.
• The promoter's or adviser's working papers and the information memorandum—for the reasonable-care story and any negligence question.
• Your own self-assessment return and the relief claim—to see exactly what was claimed and on which certificate.

Where a document is missing because the promoter has gone quiet, the steps in the penalties section above explain how to reconstruct the position without them.

Six Things To Do This Week

1. Calendar every deadline today. The 30 days appeal window from the date on the letter. If it has already slipped, read the late appeal guide immediately—do not wait.
2. File a protective appeal and a section 55 postponement application. Appeal in time even if your grounds are not yet perfect; ask in writing to postpone the income tax, the revived or collapsed CGT, and any penalty. You can refine grounds later; you cannot un-miss the deadline.
3. Work out which of the two appellants you are, and which single condition HMRC contests. Re-read the letter against the battlegrounds table. Company refusal or investor assessment? Which section number? Everything else follows from that.
4. Pull the documents. Articles, share classes, subscription agreements, the full EIS1/SEIS1→EIS2/SEIS2→EIS3/SEIS3 chain, the advance-assurance application and response, and the promoter's working papers. Start now—some come from third parties.
5. Get independent advice from someone with no stake in the original structuring. The person who designed the share class or filed the compliance statement is the wrong person to assess what went wrong. Realistic options: a Chartered Tax Adviser via CIOT, a chartered accountant via ICAEW, or a specialist tax barrister through the Bar's Public Access Scheme. If a wrong-form or legitimate-expectation point is in play, ask specifically about the right forum.
6. Decide whether a statutory review fits. For a clean legal point that can be decided on documents, the 45 days review may be worth using before the tribunal. For a fact-and-evidence dispute, head for the tribunal.

Key Legislation And Resources

Legislation

• Part 5, ITA 2007 — Enterprise Investment Scheme (sections 156–257)
• Section 157A, ITA 2007 — the EIS risk-to-capital condition
• Section 158, ITA 2007 — form and amount of EIS relief (30%)
• Section 173, ITA 2007 — the shares requirement; preferential rights (s.173(2)/(2A))
• Section 175A, ITA 2007 — permitted maximum age
• Section 186, ITA 2007 — gross-assets requirement
• Section 186A, ITA 2007 — number-of-employees requirement
• Section 189, ITA 2007 — meaning of "qualifying trade"; excluded activities at ss.192–199
• Section 235, ITA 2007 — assessments to withdraw or reduce EIS relief
• Section 236, ITA 2007 — appeals against section 234(3)(b) notices
• Part 5A, ITA 2007 — Seed Enterprise Investment Scheme
• Section 257AB, ITA 2007 — form and amount of SEIS relief (50%)
• Section 257DI, ITA 2007 — SEIS gross-assets requirement (£350,000)
• Section 257DL, ITA 2007 — SEIS amount-raised limit (£250,000 from 6 April 2023)
• Section 257G, ITA 2007 — assessments to withdraw or reduce SEIS relief
• Schedule 5B, TCGA 1992 — EIS capital gains deferral
• Schedule 5BB, TCGA 1992 — SEIS capital gains reinvestment exemption
• Section 14, Finance Act 2018 — inserted the risk-to-capital condition (15 March 2018)
• Sections 9A, 28A, 29, 31, 31A, 50, 55 TMA 1970 — enquiry, closure, discovery, appeal, burden of proof, postponement
• Limitation Act 1980 — sections 5, 14A, 14B for a separate negligence claim

Key Cases

• Flix Innovations Ltd v HMRC [2015] UKFTT 558 (TC) — EIS preferential right to assets; shares non-qualifying under s.173
• Flix Innovations Ltd v HMRC [2016] UKUT 301 (TCC) — UT upholds; strict application of the share-rights conditions
• Foojit Ltd v HMRC [2021] UKUT 14 (TCC) — preferential dividend right excluded; advance assurance not binding
• X-Wind Power Ltd v HMRC [2017] UKUT 290 (TCC) — no route to withdraw/replace a compliance statement; wrong form fatal
• GDR Food Technology Ltd v HMRC [2016] UKFTT 466 (TC) — same wrong-form pattern; appeal dismissed
• Innovate Commissioning Services Ltd v HMRC [2017] UKFTT 741 (TC) — wrong form; HMRC warning not acted on; appeal dismissed
• Fashion on the Block Ltd v HMRC [2021] UKFTT 306 (TC) — wrong-form line distinguished; taxpayer win on narrow facts
• Cry Me A River Ltd v HMRC [2022] UKFTT 182 (TC) — SEIS risk/qualifying-company point; taxpayer win (pre-2018 framing)
• Putney Power Ltd & Ors v HMRC [2023] UKFTT 292 (TC) — Rule 18 case-management decision (procedural only); substantive issue decided by the Upper Tribunal in Putney Power Ltd & Anor v HMRC [2026] UKUT 105 (TCC)
• HMRC v Tooth [2021] UKSC 17 — "deliberate" requires intent to mislead
• Perrin v HMRC [2018] UKUT 156 (TCC) — four-step reasonable-excuse framework
• HMRC v Katib [2019] UKUT 189 (TCC) — adviser failings generally attributed to the taxpayer

HMRC Guidance

• VCM14020 — EIS compliance statement and certificate procedures
• VCM15010 — withdrawal or reduction of EIS relief; special-assessment mechanism
• VCM60110 — EIS advance assurance overview ("based on the information provided")
• VCM60140 — where HMRC is not bound by an assurance given
• VCM60170 — advance assurance "does not guarantee that the investors are eligible to claim tax relief"
• VCM60210 — SEIS advance assurance overview
• Venture Capital Schemes Manual — full manual contents
• Apply for advance assurance — the application process

On This Site

• R&D tax credit appeals — cluster sibling; the corporation-tax analogue and the "consultancy gone silent" playbook
• BADR appeals — cluster sibling; CGT relief refused, the battlegrounds decoder structure, s.50(6) burden
• HMRC enquiries and closure notices — s.9A enquiry / s.28A closure notice mechanics
• Discovery assessments — s.29 TMA; the 4/6/20-year limits
• Writing grounds of appeal — drafting company and investor grounds against the s.50(6) burden
• Postponing payment during appeal — s.55 TMA mechanics for clawed-back tax and revived CGT
• What is a reasonable excuse and Perrin v HMRC — the reasonable-care framework
• HMRC penalties explained and self-assessment penalties — Schedule 24 FA 2007 bands
• Tooth v HMRC: deliberate inaccuracy — the subjective test if HMRC alleges 20-year discovery
• Martland v HMRC: late appeals and late appeal to tax tribunal — the Katib rule and the missed-deadline route
• How to appeal to the tax tribunal — filing the notice of appeal
• HMRC internal review — the 45 days statutory review
• CIS appeals — cluster sibling; the construction-scheme gross-payment-status and deduction regime
• Tribunal tracks and costs — Standard vs Complex, the 28-day opt-out, cost-shifting
• Preparing for your tax tribunal hearing — bundles and witness statements
• After your tax tribunal decision and Upper Tribunal appeal — onward routes (Flix, Foojit, X-Wind all went to the UT)
• Settling your tax tribunal case — s.54 agreements
• Interest on unpaid tax — interest on clawed-back relief and revived gains
• Tax dispute timeline — where EIS/SEIS appeals sit in the wider HMRC journey

This article is for informational purposes only and does not constitute legal or tax advice. For advice specific to your situation, consult a qualified tax adviser, accountant, or solicitor.