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HMRC internal manual

Venture Capital Schemes Manual

Venture Capital Schemes:risk-to-capital condition: advance assurance and compliance checks

Advance assurance

As set out in the government’s response to the consultation on advance assurance, Tax-advantaged venture capital schemes - streamlining the advance assurance service, HMRC will not provide advance assurances for investments that, taking into account all the facts that HMRC has available relating to the case, appear likely to fail the risk-to-capital condition or to have failed it had the investment been made after the condition came into force.

Compliance checks

A judgement about whether the risk-to-capital condition is met will be made by taking into account all relevant circumstances at the time the investment is made.

HMRC will carry out post-investment checks on companies on a risk basis. Tax relief may be withdrawn if it becomes clear that the information supplied at the time of investment was misleading or incomplete and re-considering all the circumstances, including the information that has come to light, it is now reasonable to conclude that the risk-to-capital condition was not met. A company cannot rely upon an advance assurance or authorisation to issue compliance certificates if the full facts relating to the company’s eligibility are withheld from HMRC at the time of investment.

Similarly, these post-compliance checks will determine whether a company has used the money it has raised for the purposes stated at the time of the investment (for example, in its EIS or SEIS compliance statement).