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Five things you need to know about the SEIS and EIS Advance Assurance Process

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The Seed Enterprise Investment Scheme (“SEIS”) and the Enterprise Investment Scheme (“EIS”) were introduced by the Government to allow high risk start-up companies to raise capital by offering investors attractive tax reliefs and in turn reducing their capital at risk. The main benefits for investors of SEIS are 50% ncome tax relief, loss relief if the investment fails, capital gains tax (“CGT”) deferral and founders relief. EIS is similar, the main difference is that the income tax relief is 30% and there is no founders relief benefits. Qualifying companies can raise £150,000 through SEIS and £12m through EIS (a maximum of £5m per 12 months).

In order to determine whether or not a company qualifies, HMRC has an advance assurance process, which essentially tells investors that the company meets all the qualifying conditions based upon the information supplied. Advance Assurance lets investors know that if they invest their capital in the company and it remains qualifying, they will obtain their relevant reliefs.

Below are five things you should know about the advance assurance process:

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  1. You can apply for SEIS and EIS Advance Assurance at the same time — There are different qualifying conditions for both SEIS and EIS, however, it is possible to combine the application. It is important to still detail the individual elements of each scheme in order to demonstrate how the company qualifies for both SEIS and EIS. 

  2. Demonstrate investor interest — To avoid speculative advance assurance applications, HMRC requires the name and addresses of  potential investors (three to six is advised), alternatively, a letter of intent from a fund or crowdfunding platform is also qualifying.

  3. Explain and detail how the company meets the Risk to Capital condition There are two parts to the Risk to Capital condition, the company must intend to grow and develop over the long term and there must be a significant risk to the investors capital and a higher chance to lose more than they gain. 

  4. A copy of the most up to date business plan — It is a requirement that a business plan must be submitted with the Advance Assurance application. A pitch deck or information memorandum is not a qualifying alternative, however, these also must be submitted if they are intended to be distributed to investors. It is important to submit the most up to date business plan, this increases the validity of the advance assurance. 

  5. Copies and details of any draft subscription agreements must be included — If the company intends to issue a shareholders agreement or subscription agreement, this must be submitted with the application, even in draft form. 

The Advance Assurance process is always recommended to ensure that a company meets all the qualifying conditions of SEIS and/or EIS.

Johnathan Graham
Johnathan Graham
Johnathan assists companies with business plans, advanced assurance applications for SEIS, EIS and R&D tax credits. Johnathan has a keen interest in helping start up companies, stemming from his entrepreneurial background in owning two companies of his own. Contact Johnathan by email at: johnathan@sapphirecapitalpartners.co.uk.

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