The Upper Tribunal (tribunal), disagreeing with the First-tier Tribunal (FTT), has held that a gain realised on the disposal of a mixed-use asset cannot be apportioned between its business use and non-business use for the purposes of claiming enterprise investment scheme (EIS) relief.

The taxpayer disposed of two mixed-use assets and sought to claim EIS relief on the non-business gains and taper relief on the business gains. The taxpayer argued that the taper relief provisions, which deemed there to be two disposals of each asset so that the gain on the disposal of each was apportioned between business use and non-business use, should also apply for EIS relief purposes. However, HMRC contended that EIS relief should be applied to the undivided gain, with taper relief applying to any remaining balance.

The FTT agreed with the taxpayer but acknowledged that the issue was finely balanced. For a discussion of the FTT's decision, see Legal update, EIS relief can be allocated in most favourable way for taper relief (FTT).

The tribunal found that the taper relief provisions, deeming there to be two disposals, only applied for the purposes of taper relief, not EIS relief. The provisions were contained in a schedule concerned solely with taper relief. In addition, when taper relief was introduced, the EIS relief legislation was not amended to provide that there would be two deemed disposals in accordance with the taper relief provisions. There was, therefore, no ambiguity in the legislation.

For information on EIS relief and taper relief (which has been abolished for disposals on or after 6 April 2008), see Practice notes, Enterprise Investment Scheme (EIS) and Taper relief: overview.

Case: HMRC v Stolkin [2014] UKUT 0165 (TCC) (Richards J).