VCM60310 - Venture Capital Schemes Manual: venture capital schemes: the Social Investment Tax Relief: advance assurance requests: overview

Social enterprises that are seeking investment under the SITR may request an assurance from HMRC, that a prospective investment is likely to be eligible, before issuing the shares or debentures, 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 social enterprise to obtain an advance assurance before receiving a qualifying debt investment or issuing shares to investors.

The advance assurance service is not a registration service: it is offered to social enterprises that are seriously seeking funding under SITR.

If a social enterprise 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 application, the social enterprise is required to state that it will be able to complete the statutory declaration in respect of the qualifying conditions, including future behaviours when the shares or securities are issued.

The social enterprise 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 social enterprise 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, HMRC will usually provide an opinion as to whether it would authorise the social enterprise to issue compliance certificates were the social enterprise to carry out its intentions as described and then to submit a compliance statement following an issue of shares or a new qualifying debt investment. This requires HMRC to form a view as to whether the conditions of the scheme would be satisfied, on the assumption that the social enterprise 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 SITR. The VCR Team will provide an advance assurance only if it considers the proposed investment will meet the SITR rules, and the social enterprise 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 VCM60350.

An advance assurance will not be valid if it is later found that the social enterprise 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 or qualifying debt investment. An assurance given in respect of one share issue or debt investment should not be regarded as providing assurance in respect of a different share issue or debt investment.

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.

Social enterprises should follow the guidance in VCM60300to make the application and ensure all the relevant information is supplied. To assist with processing applications it is helpful if the social enterprise provides a contact telephone number in case it is necessary to discuss the application.

The rules of confidentiality apply. Requests will be considered only if they are submitted by the social enterprise’s secretary or a director or trustee or by a person authorised by them to negotiate with HMRC on their behalf. If the social enterprise, or its authorised agent, wishes to correspond by email they must provide a disclaimer to the VCR Team see VCM2035.

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