Venture Capital Schemes Manual: venture capital schemes: the Enterprise Investment Scheme: advance assurance requests: no speculative applications
Companies that have never raised an investment under one of the tax-advantaged schemes (the SEIS, EIS, VCTs or SITR) must demonstrate their intention, and their likely success in raising the money, by providing information about their prospective investors in their advance assurance application. Companies must have engaged with individuals or business promoters who have agreed their investment plans are viable and are likely to attract investors. This approach helps HMRC to focus the service on companies that are likely to use the scheme successfully to raise money for their growth and development.
In general, for companies raising money directly from investors, the information that must be supplied as part of the advance assurance application is the name and address of the prospective investor or investors and the amounts of the intended investment. It is not enough to provide the names of, say, one or two investors who are expected to invest a small proportion of the total investment. The company must demonstrate that it has serious expectations that named individuals will invest the amount specified in the application.
Where the company is intending to raise money through an intermediary or market, the requirements are as below:
- AIM companies: no investor information is required
- Companies seeking to list on AIM: the name and registration number of the Nominated Adviser (Nomad) engaged by the company to support its listing
- Companies seeking investment through a fund manager or other business promoter: evidence, for example letters or emails, to demonstrate the fund manager or promoter has agreed to act on the company’s behalf. The agreement may be provisional, that is, subject to various conditions, including the company securing an advance assurance. It is not enough for the company to show it has approached a fund manager or other business promoter; there must be confirmation that the fund manager or business promoter has agreed the company may be a viable investment for their customers and that further engagement is underway
- Companies seeking investment through a crowdfunding platform: evidence, for example letters or emails, to demonstrate that the company has engaged with and begun the screening process with the platform. It is not enough for the company to show it has approached a platform; there must be confirmation that the platform accepts the company may be a viable investment for its customers and that further engagement is underway
Failure to disclose the involvement of an intermediary will invalidate any assurance given.
Advance assurance applications by companies that have successfully raised investments under one or more of the schemes, and are seeking further funding, will not be rejected automatically if they do not include information about the company’s prospective investors. However companies may find it helpful to provide the information. For instance, companies need to confirm in their advance assurance application that they meet the risk-to-capital condition, and in some cases the source and method of funding will be relevant. The details of any fund expected to invest in the company must always be provided.
HMRC will not comment on a company’s status as a knowledge-intensive company unless the company’s eligibility, or a named investor’s eligibility, for the EIS depends upon that status.
Companies seeking confirmation of their knowledge-intensive status only because a prospective investor may wish to invest more than £1 million in the tax year must provide the names and addresses of the prospective investors who depend upon the company’s knowledge-intensive status to invest under the EIS.