A common question among EIS/SEIS beginners, as all the relevant paperwork can get hard to keep up with! Capdesk comes to the rescue once again, with an easy-to-digest account of everything you need to know before you submit your application. Let's dive in.
Advance Assurance is a document you may submit to HMRC in order to receive provisional confirmation that your company qualifies for EIS (Enterprise Investment Scheme) or SEIS (Seed Enterprise Investment Scheme). It’s important to note that Advance Assurance is not a formal guarantee that you’ll meet the EIS or SEIS criteria - as eligibility can only be granted once you’ve actually issued the shares - but it’s nevertheless a strong indication that you are likely to qualify. This is often very helpful to small and medium size businesses to attract investors based on the potential of ultimately receiving EIS or SEIS tax relief.
*Advance Assurance can also apply to Social Investment Tax Relief (SITR) and Venture Capital Trust (VCT) schemes, which will not be covered here.
Obtaining an approved Advance Assurance is not a legal requirement for EIS/SEIS eligibility. You can start your EIS/SEIS application process choosing to skip this part entirely. However, many businesses prefer to file in their Advance Assurance because of how encouraging it is for potential investors. If you’re worried about the extra paperwork this puts on your plate, you’ll be happy to know that quite a bit of information you submit in your Advance Assurance is required when you file your EIS1 anyway, and you won’t have to repeat that information to HMRC if you’ve already filed it in through the Advance Assurance.
It goes without saying that you’re only eligible for an Advance Assurance if you meet the eligibility criteria for EIS/SEIS overall.
If you think you do meet these criteria, then one of the following people is allowed to submit the application on behalf of your company:
Your company secretary
A company director
An authorised agent
Regardless of the scheme you’re applying for, your Advance Assurance will ask you for the following information:
The amount you aim to raise and, if your business has subsidiaries, which companies they’re intended for
Your business plan, financial forecasts, and any documents you used to support your funding proposal to potential investors.
A copy of your latest accounts (if applicable)
An account of all your intended trading and activities (including expected expected for each of these)
The names of schemes you’ve received investment thgrough in the past (if applicable), plust the amounts, dates for the funds raised.
An up-to-date memorandum and articles of association (including any planned changes to these).
Your most recent register of members.
An overview of any other agreements with your shareholders.
Additional documents you think might help prove your eligibility.
An explanation of how you meet the risk to capital condition.
If your business has subsidiaries, the information you provide will have to cover these too.
Also, if the application is being submitted by an authorised agent, you’ll need to include a letter signed by one of your directors or trustees.
Under certain circumstances, you might need to provide HMRC with additional types of information. Specifically:
Investor Information: If you’re raising money directly from investors, HMRC will need to know their names and addresses unless you’ve used a venture capital scheme before, or are listed on the Alternative Investment Market (AIM).
AlM: If you plan to list on it, you’ll have to provide the name and registration number of the nominated adviser supporting your business’s listing.
Other Investment Channels: If you’re raising funds through a fund manager or business promoter, you’ll have to offer proof of their agreement to work for you currently and in the future. If you’re crowdfunding, you must provide evidence that the relevant platform has accepted your proposal and intends to continue collaborating with you.
Whether your application is successful or not, you will hear back from HMRC when they are done reviewing it - unless your submission was incomplete, or was not considered.
If your application was successful: HMRC will contact you with a statement saying your investment is very likely to qualify for EIS/SEIS. This statement is what you want to show your investors as proof that they’ll likely benefit from the scheme you’re applying for should they invest. Now you’re ready to proceed with your EIS1 with more confidence!
It’s good to know that your Advance Assurance technically doesn’t have an expiration date, however it does cease to be valid the moment that any information you included in it changes. In that case, you’ll have to inform the HMRC about the change(s) when submitting your EIS1.
If your application was rejected: HMRC will let you know the reasons why they thought it didn’t meet the eligibility criteria. You can reapply for an Advance Assurance in the future.
Interested to find out how much of this you can automate? Take a read at our blog on EIS features on Capdesk.