Advance Assurance for SEIS and EIS

What is Advance Assurance? 

Advance Assurance is an indication from HMRC that an investment is likely to qualify for tax relief under one of the UK’s venture capital schemes – such as the Seed Enterprise Investment Scheme (SEIS) or the Enterprise Investment Scheme (EIS).

Early-stage startups hoping to raise venture capital funding through SEIS or EIS can apply for Advance Assurance before approaching investors. If a company receives confirmation from HMRC of its eligibility for SEIS or EIS, it’s typically seen as a more attractive investment opportunity. However, Advance Assurance doesn’t guarantee that an individual investor would meet the conditions of the scheme.

This article explains the benefits of Advance Assurance and how the application process works.

Eligibility for Advance Assurance 

Before you can apply for EIS or SEIS Advance Assurance, you’ll need to check whether your company qualifies for the relevant scheme. The application process is all about proving to HMRC that you meet the SEIS or EIS eligibility criteria.

Advance Assurance application 

Applying for Advance Assurance involves several key steps: 

• Verifying that your company is eligible for SEIS or EIS

• Preparing a business plan or pitch deck and a financial forecast

• Finding at least one investor interested in your funding round

• Checking whether you've already received any de minimis state aid

• Gathering your company documents and Unique Taxpayer Reference (UTR)

• Completing and submitting your application

Company information 

During the application process, you’ll be asked to provide certain company details and supporting documents, as outlined below.

Company trading start date 

The date your company started trading may be earlier than the date of your first commercial sale, and it won’t necessarily match the date of incorporation. According to HMRC guidance, "A company may use the date of commencement of trade, or the date the business was started, rather than the date of the first commercial sale for the purposes of applying the maximum age rules if it wishes". The date you choose must be consistent across the business plan, bank records and other documents you submit to HMRC.

Previous venture capital scheme investments 

You’ll need to provide details of any funding already received through SEIS, EIS, Venture Capital Trusts (VCTs) or Social Investment Tax Relief (SITR). Keep in mind that any capital you’ve previously raised under these schemes will count towards your £12 million lifetime EIS investment limit.

Fundraising proposal

To determine whether your proposed investment will meet the qualifying conditions for SEIS or EIS,  HMRC needs to know how much money you plan to raise and what you plan to spend it on (e.g. research and development). This includes details of your business activities and trading history, so it’s worth checking HMRC’s list of excluded activities.

Response to the ‘Risk to capital’ condition

HMRC introduced the risk to capital condition to prevent venture capital schemes being used for tax avoidance. To prove that your company meets this condition, you’ll need to submit a pitch deck or SWOT analysis demonstrating that:

• The proposed investment represents capital at risk, meaning that investors could lose more money than they’re likely to gain

• The funding will be used to grow and develop your business over the long term

• There are no arrangements in place to reduce risk for individual investors

Interest from at least one investor

You’re required to provide the name and address of at least one potential investor, as well as the proposed funding amount. Even if the investment isn’t committed, these details show HMRC that your company is serious about raising capital through SEIS or EIS.

It’s a good idea to list a reputable investor or VC firm on your application, especially if you haven’t previously received funding through a venture capital scheme. Crowdfunding platforms can be included, as long as you provide a letter of engagement as evidence of the agreement.

Supporting documents

• Your latest company accounts or bank statements

• An up-to-date copy of your memorandum and articles of association

• A three-year business plan or pitch deck 

• Your register of members (accurate up to the Advance Assurance application date)

• Evidence of any previous investments, grants or de minimis state aid  

• Any documents you send to potential investors, such as a financial forecast

Frequently asked questions

1. Is Advance Assurance a legal requirement?

You don’t have to obtain Advance Assurance in order to qualify for SEIS or EIS, and doing so doesn’t guarantee eligibility for your company or potential investors. Nonetheless, if there are no material changes to your company’s circumstances or documents between securing Advance Assurance and issuing SEIS or EIS shares, the investment should qualify. 

2. When should I apply for Advance Assurance? 

To allow enough time for HMRC to approve your application, you should apply for Advance Assurance one to two months before securing investment. Keep in mind that you’ll need to list at least one potential investor on your application. 

3. How long does HMRC take to approve Advance Assurance?

It can take anywhere from 15-45 working days to receive approval from HMRC. To avoid delays in processing your application, fill out HMRC’s SEIS checklist or EIS checklist and submit it along your Advance Assurance application form.

4. Does Advance Assurance expire?

Advance Assurance doesn’t have a set expiration date. However, your application will lapse if anything changes and your company no longer meets the eligibility criteria for SEIS or EIS.

5. How do I apply for Advance Assurance?

You can apply for Advance Assurance by completing an online form and submitting it to HMRC via your Government Gateway account. Only certain people are authorised to complete the application: company secretaries, directors, trustees or an agent acting on your company’s behalf.

However, it’s much simpler and faster to use Carta for SEIS or EIS Advance Assurance. Our experts will work with you to collect all the necessary information and documents, before opening an Advance Assurance application on your behalf. Once we’ve submitted the application, we’ll handle any further discussions with HMRC while you wait for approval.