VCM14020 - Venture Capital Schemes Manual: the Enterprise Investment Scheme: income tax relief: company and investor procedures: statutory process

The statutory procedure for obtaining any relief in respect of a subscription for shares is as follows:

  1. The company that has issued the shares supplies a compliance statement to HMRC using the form EIS1 listing the subscribers who have requested certificates and giving information about such matters as the company’s trade and capital structure.
  2. Compliance Statement form EIS1 is available from GOV.UK, HMRC’s website Guidance: Use the Enterprise Investment Scheme (EIS) to raise money for your company
  3. A company must confirm when completing the compliance statement that the conditions for the relief (apart from any which relate to the investor) have been satisfied so far, and that it intends to ensure that they continue to be satisfied.
  4. If on examining the compliance statement HMRC is satisfied that it should do so, it will send the company a blank compliance certificate, form EIS3, and a Unique Investment Reference (UIR), using form EIS2 to authorise the company to issue the appropriate number of certificates.
  5. The company completes the EIS3 certificates, adding the details of the investment and the UIR, and issues the form to its investors.
  6. Each subscriber or where the subscriber is a nominee, the beneficial owner of the shares - can then claim relief (see VCM14160 regarding claims to income tax relief and VCM23200 for claims to CG deferral relief).

A company must complete an EIS1 compliance statement (EIS1 is available from GOV.UK, HMRC’s website Guidance: Use the Enterprise Investment Scheme (EIS) to raise money for your company) even if the company has received an opinion from HMRC using the advance assurance service that the particular share issue would meet the requirements of the scheme.

It is essential that the company submits the correct information on the EIS1 as the EIS3 certificate issued to the investor is based on this information. In the case of Ashley v Revenue & Customs Commissioners (SpC 633) the investor was unable to claim relief as the EIS1 and the subsequent EIS3 referred to the incorrect date for the share issue. The onus is on the investor to check the EIS3 certificate and, if necessary, request that the company correct the position. If the company refuses to correct the position the investor should inform HMRC.

HMRC will be bound by an opinion given in an advance assurance as long as the information contained within the compliance statement matches the information provided at the advance assurance stage. However, HMRC will not be bound by any assurance given if the information provided for the assurance ultimately turns out to be inaccurate, misleading or incomplete.

In cases where the subscription is made through an approved investment fund (see VCM16050 ) the company will send a form EIS3 to the manager of the fund, they will use it as their authority to send each participant in the fund form EIS5. Those participants can then claim relief.