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As the relief available for EIS and SEIS investments is a significant incentive for investors they will often require confirmation that the investment will qualify for relief before they will transfer any funds.
Such confirmation can be obtained from HMRC by making an application for advanced assurance.
The application can be found online and requests details of the proposed investment. Once complete it should be sent to HMRC along with the following documents/information:
An explanation of how you meet the ‘risk to capital condition’ should also be provided. This is essentially a declaration that the investment will be used for growth and development of the trade, and the investment represents a risk to the investors capital, i.e. the investment cannot be secured in any way and there must be a real risk that the investor will lose more than they are likely to gain as a net return. Reference should be made to the company’s trade and the use to which the funds will be put.
HMRC have also issued new guidance to the effect that they will no longer be accepting speculative applications and now require details (name, address and NI/UTR number) of potential investors for any company seeking advanced assurance which has not previously used a venture capital scheme before.
HMRC will take up to 45 days to respond to an advanced assurance application. They will usually give a yes or no response (and if no provide reasons) but they may request further information upon which to make their decision.
Seeking advanced assurance is not necessary to claim EIS/SEIS relief however it will provide clarity for potential investors and simplify the certification process once the investment has been made.
For further information contact our Simmons Gainsford Tax Consultant Antony Greenwood – Antony.Greenwood@sgllp.co.uk
Posted on 10th Jul 2020
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