VCM60410 - Venture Capital Schemes Manual: Venture Capital Trusts qualifying holdings:advance assurance requests: overview

The advance assurance service is a non-statutory service offered by HMRC on a discretionary basis, where HMRC may offer an opinion as to whether a prospective investment would be a qualifying investment, see VCM60050.

In general, companies seeking an investment from a Venture Capital Trust (VCT) should not need an advance assurance from HMRC. VCTs should be able to rely upon their professional advisers to determine if a prospective investment is qualifying or not.

Companies seeking an assurance need to allow adequate time for HMRC to consider the request properly. VCT investments are generally more complicated than those for other schemes and advance assurances will take longer than others to review.

HMRC will expect a VCT to take all reasonable steps to ensure an investment would be qualifying.; for example, acting on professional advice specifying the technical basis upon which the proposed investment would meet each requirement in Chapter 4 of Part 6 ITA 2007. The professional adviser should be familiar with the VCT scheme and its rules and restrictions.

  • It may not be possible for a professional adviser to confirm with absolute certainty that an investment would be qualifying, and advice may be caveated. Advice with such a caveat would be considered to be within the reasonable steps taken by the VCT
  • Where an advance assurance has been obtained previously, it is reasonable to rely on the relevant aspects of that assurance so far as the circumstances are unchanged, provided that full disclosure had been made to HMRC in the original application, and HMRC has not changed its view, for example where an officer had explained that an advance assurance given in error would be honoured.

Provided that the VCT has taken reasonable steps HMRC will not withdraw approval from the VCT if the investment subsequently turns out to be non-qualifying. HMRC will accept that the breach was outside the control of the VCT.

If there remain genuine doubts about whether a proposed investment is qualifying, the company may seek an advance assurance from HMRC, (see VCM60040 where to send a request for advance assurance). The company must explain how it meets each condition, see Checklist, and draw attention in its application to each point of doubt with a full technical explanation as to why it believes the requirement is met. 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, VCM60430.

The purpose of the service is not simply to agree every application but for HMRC to provide its opinion on whether a proposed VCT investment would be eligible. The VCR Team will provide an advance assurance only if it considers the proposed investment will meet the VCT 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 issue of shares or securities.

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

An advance assurance will not cover the status of the VCT itself, that is, whether the investment would enable the VCT to meet the conditions for approval under section 274 ITA 2007. Those conditions depend upon the VCT’s other investments.

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 provides details of those investors.

Companies wishing to make an advance assurance must complete the advance assurance application form.

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.