EIS: income tax relief: company and investor procedures: advance assurance requests: responding to applications
The response to an application for an assurance will take the form of a statement as to whether, on the basis of the information provided, HMRC would be able to authorise the company to issue certificates under ITA07/S204 in respect of the shares to be issued, following receipt of a form EIS1 satisfactorily completed. The granting of an assurance is therefore an indication that HMRC considers that the requirements in Chapters 3 and 4 of Part 5 are likely to be met insofar as it is possible for them to be met for the time being on the date the company provides its compliance statement.
An advance assurance does not indicate an acceptance by HMRC that the company will continue to meet all of the requirements which must be met throughout the qualifying period for the shares. The company should make investors aware that the holding of an advance assurance does not guarantee that the investors are eligible to claim tax relief (they must meet certain conditions on an individual basis), or that tax relief will not be reduced or withdrawn at a later date. Where an assurance is given and shares are issued in reliance on it the company will need to take care that the conditions relating to the company and its trade are complied with throughout the three year period (see VCM10540) related to the shares.
In some cases there will be a clear indication in the company’s application for advance assurance that the company may at some future time within the three year period cease to satisfy one of the conditions (for example, excluded activities which the company intends to carry on might come to be a substantial part of its trade, see VCM3000+). As explained above, the assurance given relates only to the likelihood of the requirements being met at the point at which HMRC is being asked to authorise the issue of compliance certificates (EIS3s) to its investors. The assurance may include a reminder about the need for the company to meet the conditions for a continuing period, and may incorporate an explanation as to how it is proposed to apply the test in question (for example, how it is proposed to decide whether the excluded activities make up a substantial part of the trade).
Where a company supplies valuations or forecasts responsibility for their accuracy lies entirely with the company.
Where the officer is unable to give an advance assurance, a brief explanation of the reason will be given. But it is entirely the company’s responsibility to decide what amendment, if any, it should make to its proposals.
Once a refusal has been issued HMRC will not engage in further technical correspondence about the circumstances of the investment. The company may submit a new application if the details of a prospective investment change.
We aim to respond to a company’s application within 15 working days, and no later than 40 days. However, complex cases may take longer to deal with. Companies should follow the guidance in VCM14040 to help them provide all the relevant information, to help minimise the time taken to consider the application.