Venture Capital Schemes Manual: venture capital schemes: the Enterprise Investment Scheme: advance assurance requests: responding to applications
The response to an application for an assurance will usually 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 VCS EIS1 satisfactorily completed. However in some cases, HMRC may ask for further information.
The granting of an assurance is an indication that HMRC considers that the requirements in Chapters 3 and 4 of ITA07/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claim tax relief (they must meet certain conditions on an individual basis), or that tax relief will not be reduced or withdrawn at a later date. An advance assurance will not exempt the company from complying with the conditions necessary to ensure that the EIS investment remains a qualifying investment and complies with the conditions relating to the company and its trade 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. It is entirely the company’s responsibility to decide what amendment, if any, it should make to its proposals as a result of an application being refused.
In some cases the information provided, or the nature of the proposed activity, does not enable HMRC to come to a conclusion about whether a company would be eligible to receive an EIS investment. In these circumstances HMRC may ask for further information or decline to give an advance assurance.
Once HMRC has provided an opinion they will engage in no more than two rounds of correspondence about the circumstances of the investment, see VCM60050.
HMRC will not engage in further correspondence where an advance assurance has been issued. The company must submit a new application if the details of a prospective investment, or any information about the authorised advance assurance, changes.
HMRC aims to respond to most applications within 15 working days. However, complex cases take longer to consider and HMRC aims to respond within 40 working days. A response may take the form of an advance assurance, a rejection or a request for more information. Companies should follow the guidance in VCM60120 to help them provide all the relevant information, to help minimise the time taken to consider the application.