VCM60460 - Venture Capital Schemes Manual : Venture Capital Trusts qualifying holidings: advance assurance requests: responding to applications

The response to an application for an advance assurance will be a statement as to whether, on the basis of the information provided, HMRC is satisfied that on issue that holding will comply with the requirements of ITA07/Part 6 Chapter 4 insofar as that is possible at the time the investment is made (and, where applicable, that the shares to be issued will be eligible shares).

An advance assurance will not cover the status of the VCT itself. Whether the investment allows the VCT to meet the conditions for approval under section 274 ITA 2007 will also depend on the VCT’s other investments.

An advance assurance does not indicate an acceptance by HMRC that the company will continue to meet all of the requirements which the company must continue to meet as a qualifying holding. An advance assurance will not exempt the company from complying with the conditions necessary to ensure that a VCT’s investment remains a qualifying holding.

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 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 +. 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 investment. In these circumstances HMRC may ask for further information or decline to give an advance assurance.

Once HMRC have 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 respond to VCT applications 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 VCM60430 to help them provide all the relevant information, to help minimise the time taken to consider the application.