SEIS: company and investor procedures: company procedures: advance assurance requests: information needed
In order to give an assurance the HMRC officer will need to be satisfied that:
- the company is a genuine growth company (for shares issued on or after Royal Assent to the Finance (No. 2) Bill 2017-19; see VCM8500+)
- the company can be expected to be a qualifying company (see VCM34010),
- the shares to be issued will be eligible shares (see VCM33020),
- the shares are to be issued to raise money for a qualifying business activity (see VCM33050),
- the money raised is to be employed only by companies that satisfy the rules of the scheme.
When making its request for an assurance the company may supply primary facts or broad statements (such as, ‘the shares to be issued will be eligible shares’). We will not give an assurance unless the information supplied includes all the following:
- a copy of the latest available accounts of the company, and of any subsidiary company. If the company has not yet drawn up a set of accounts, we do not expect it to do so for this purpose
- the company’s business plan including financial forecasts (see below)
- details of all trading or other activities to be carried on by the company and any subsidiary, and a note of which company or companies will use the money raised
- a schedule of all tax-advantaged investments received by the company, including the amount, date and scheme under which each investment was received
- details of the amount the company hopes to raise, and a schedule of the activities, and amounts, on which it (or its subsidiary) intends to use the money; the amount does not need to be precise but should be close to the actual amount needed and not state rough figures such as ‘up to £5 million’
- an up-to-date copy of the Memorandum and Articles of Association of the company and of any subsidiary, and details of any changes to be made
- a copy of the register of members at the date of submission of the advance assurance application
- details of any subscription agreement or other side agreement to be entered into by the shareholders
- confirmation that the company expects to be able to complete the declaration on form SEIS1 in due course
- details of the potential investors; if the company is using an intermediary to provide investors, details of the fund managers or other business promoters who are expected to provide these investors (see VCM35045)
- a copy of the latest draft of any prospectus, information memorandum, brochure or similar document relating to the relevant fund raising or offer to be issued to potential investors
- any other relevant information, for example group structure diagram.
Companies should ensure that they are aware of all of the qualifying conditions of the scheme and provide any further information they think may be necessary to allow the officer to consider whether all the requirements are likely to be met. For instance, details of minority holdings in other companies, or details of other companies’ minority holdings in the issuing company, may be relevant in determining whether the ‘control and independence’ requirements will be met - see VCM34080.
The company should draw attention in its application to any point of doubt with an explanation as to why it believes the requirement is met.
Any assurance supplied to a company is given only on the basis of the information provided. The HMRC officer is under no obligation to check the accuracy or completeness of that information. However, it is important that any obvious gaps in the information are filled and any apparent contradictions explained, and the officer may ask further questions to ensure that that is the case, or decline to provide an opinion if the information supplied is not sufficient to form an opinion.
All companies seeking a relevant investment must have a business plan. It is not expected that this should be a new document produced for advance assurance, but one that has already been provided or is to be made available to potential independent investors as part of any company’s normal commercial arrangements for seeking investment from the market. The business plan is a key document to persuade independent investors to invest in the company and should contain the same level of detail as any potential market investor or lender, for example a bank, would expect to see.
The level of detail will vary depending on the size of the company, its development stage and the amount of investment the company is seeking. The larger the company and/or the investment, the greater the detail that will be required for example in terms of turnover and profit forecasts. All business plans should explain how the money is to be spent, including the relevant business activity, and give details of any follow-on funding that is likely to be needed.
Where the relevant investment is follow-on funding of an earlier relevant investment the business plan should also refer back to the earlier business plan and explain how the previous investment was used. Follow-on funding received after the end of a company’s initial investing period must always be used for the same relevant business activities as a relevant investment received before the end of the company’s initial investing period or where condition B is met.
The business plan should also explain how the investment will lead to the company’s growth and development in terms of, for example, increased turnover or employees.
Where a company is seeking follow-on funding HMRC officers may ask for further information about the initial relevant investment especially if the initial relevant investment was received before 18 November 2015 and no business plan was provided at the time of the earlier investment.
HMRC will take a pragmatic approach to companies that did not provide a business plan in relation to investments received before 18 November 2015, particularly smaller companies that may not have been aware of the need to provide a business plan at the advance assurance stage. Note that the first relevant investment must always have been received by the company within the permitted maximum age limit.
Follow-on funding for the same business activities will normally be raised within a few years of the initial investment. A company that seeks follow-on funding more than five years after an earlier investment for which no business plan was provided will need to provide separate evidence that, at the time of the initial investment, and any subsequent fund raises, it anticipated the need for additional follow-on funding for the same business activities.