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HMRC internal manual

Venture Capital Schemes Manual

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HM Revenue & Customs
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EIS: income tax relief: company and investor procedures: company procedures: examining EIS1

A company cannot be authorised to issue certificates to its investors unless it has submitted a statement on form EIS1 which complies with the rules mentioned at VCM14090 and the HMRC officer is satisfied that:

  • all the information given on form EIS1 is correct, and
  • there is no reason not to accept the declaration given on the form.

If so satisfied, the officer must give the authorisation even if it appears that none of the subscribers listed will be able to obtain relief (see Wild v Cannavan, 70TC554). It is therefore not necessary for the officer to consider the identity of the subscribers at this stage.

In examining the statement the officer will consider whether any of the information supplied at any ‘advance assurance’ stage has proved inaccurate, and will explore any matters about which unsupported statements were originally accepted. Where only draft documents were previously seen (for example, a draft prospectus) the final document will be obtained and examined. If the company did not seek an assurance in advance, all the items listed in VCM14040 above will now need to be supplied.

As with the giving of advance assurances, HMRC is normally bound by a decision to authorise relief, so the company’s statement will be considered very carefully and any necessary clarification obtained before a decision is made.

Under ITA07/S207 the furnishing of a false statement attracts a penalty. The maximum penalty is £3,000.

Value received

If form EIS1 shows that any of the listed subscribers, or any associate of such a person, has received value the implications of this for the availability of relief need to be considered. (See VCM11100 for meaning of associate.)

In any case where the amount of income tax relief that might be claimed by any subscriber will be affected the HMRC officer and the company should agree the amount to be recorded on the form EIS3 to be issued to that subscriber.