VCM60110 - Venture Capital Schemes Manual: venture capital schemes:the Enterprise Investment scheme: advance assurance requests: overview

Companies seeking investment under the Enterprise Investment Scheme (EIS) may request an assurance from HMRC that a prospective investment is likely to be eligible, before issuing the shares, see also VCM60050.

The advance assurance service is discretionary and non-statutory, see VCM60010, and there is no right of appeal against the VCR Team’s decision, see VCM60050. There is no requirement for a company to obtain an advance assurance before issuing shares to investors.

The advance assurance service is not a company registration service. To be able to use the service:

  • the company must have been formed, and received a Unique Tax Reference Number (UTR) from HMRC
  • the company must be actively seeking funding under the EIS or another tax-advantaged schemes; HMRC will not provide an advance assurance on speculative applications where the company has never received an investment under one or more the tax-advantaged venture capital schemes (see VCM60130).

If a company decides to apply for an advance assurance it will be required to demonstrate that it will meet the requirements of the scheme, see VCM60020. By submitting an advance assurance form, the company is required to state that it will be able to complete the statutory declaration in respect of the qualifying conditions, including future behaviours, on Compliance statement form EIS1(VCS)v3.0 when shares are issued.

The company must provide full and open information about the proposed investment including: its intentions; its structure and activities; the proposed investment; how the monies raised will be used; how it will meet each condition; and highlight any areas of doubt. See VCM60120 for detailed guidance on information required.

If the company does not make full disclosure of the circumstances that affect its eligibility the advance assurance will not be valid. See VCM14080 for the statutory procedures to be followed once shares have been issued.

Based on the information provided by the company, HMRC will usually provide an opinion as to whether it would authorise the company to issue compliance certificates (forms EIS3 - see VCM14110) were the company to carry out its intentions as described, and submit a compliance statement (form EIS1(VCS) V3.0 - see VCM14090) following an issue of shares. This requires HMRC to form a view as to whether the conditions of the scheme would be satisfied, on the assumption the company provides its compliance statement in accordance with the information and undertakings given in the advance assurance application.

The purpose of the service is not simply to agree every application but for HMRC to provide its opinion on whether a proposed investment would be eligible under the EIS. The VCR Team will provide an advance assurance only if it considers the proposed investment will meet the EIS rules, and the company and investors abide by the undertakings given in the application. In some cases the VCR Team will refuse to give an advance assurance either because it considers the proposed investment will not be qualifying or it is unable to reach a decision on the facts, see VCM60150.

An advance assurance will not be valid if it is later found that the company has not disclosed all the relevant facts, or circumstances change between the time of the advance assurance and the share issue.

An advance assurance is given in respect of a particular issue of shares. An assurance given in respect of one share issue should not be regarded as providing assurance in respect of a different share issue.

An advance assurance is not an assurance as to the availability of relief to any particular investor. Additional conditions apply to investors, which investors must be certain they meet before making a claim to tax relief.

HMRC will not routinely provide an opinion on whether a company is a knowledge-intensive company, VCM8162. A company’s knowledge-intensive status will be considered only where:

  • the proposed investment would otherwise breach the basic rules for a qualifying company, by breaching one or more of the annual or lifetime funding limits, the age limit or the limit on the number of employees, or
  • in a combined EIS/VCT application, the company confirms it is seeking investment including from investors who would otherwise breach the EIS £1 million annual investment limit, and provide details of those investors.

Companies wishing to make an advance assurance must complete the advance assurance application form available on the HMRC website.

Companies should follow the guidance in VCM60120 to ensure all the relevant information is supplied. To assist with processing applications it is helpful if the company provides a contact telephone number in case it is necessary to discuss the application.

The rules of confidentiality apply. Requests will be dealt with only if they come from the company’s secretary or directors or from a person authorised by them to negotiate with HMRC on their behalf, see VCM60030. The VCR Team must have a completed email disclaimer that authorises them to correspond by email see VCM2035

Potential investors making enquiries about a company must address those enquiries to the company itself.