When completing an advance assurance application EIS/SEIS(AA), many get stopped in their tracks at the very first question – the “TO” box in the Details section.
What goes in that box? You should add “SCEC” in this box, which is the Small Companies Enterprise Centre.
Good luck with the rest of the application! Remember, there is much more to do than just complete this form. And if you don’t get it right first time, you’ll waste valuable time and may face questions from HMRC that could otherwise have been avoided.
Get going with your advance assurance application now.
From 2nd January 2018, HMRC made a change to their policy regarding advance assurance applications for SEIS and EIS. The aim of the change being to reduce workloads and therefore the turnaround time for applications.
Companies must now include details of the investors they have lined up for their planned funding round.
Clearly this will reduce speculative applications being made to HMRC by companies that do not end up raising investment. Conversely however, the change will slow down other rounds from closing. Companies will not have the advance assurance in hand when they are initially pitching to investors, being now forced to make the application midway through the process.
We are often asked whether you have to get an advance assurance, read on.
Once your application for an advance assurance has been submitted to HMRC and processed into their system, you can expect to wait 4 to 6 weeks to hear back from them. They will then either send you your advance assurance or they will contact you with questions.
They work strictly in the order they receive the applications. Chasing them or asking to jump the queue is a waste of time. You are in HMRC’s hands. If they are busy, it just takes longer.
In the November 2017 Budget, there was talk of targets being introduced for a 2 week turnaround for advance assurance applications. Great news if these targets can be met!
How can you get an advance assurance more quickly?
HMRC work strictly in the order they receive advance assurance applications. Chasing them or asking to jump the queue is a waste of time. You are in HMRC’s hands. If they are really busy, it just takes longer. So what can you do?
If you are about to make your advance assurance application (that investor is poised and ready to sign!) and need it back urgently:
- ensure your application is complete and that all the information HMRC need to grant the advance application is included. If they need to come back to you with questions, your application will be delayed.
- ensure your application is succinct and relevant. For new advance assurance applications, they are all sent to a central office, where they are allocated to the relevant team based on how complex they are. Our understanding is that there are less inspectors for the more complex applications, meaning they are likely to take longer. If your application is simple, make sure it is presented that way.
- if you are raising under SEIS in this round, get ahead of the game and take EIS into account at the same time.
(We can help with all these things, get in touch).
If you have submitted your advance assurance and are waiting patiently (or not so patiently) to hear back:
- ensure HMRC are authorised to contact you by email. If you are using an agent, HMRC will need to be given explicit consent to email them, their default is to use Royal Mail. Request that all communications regarding your application are sent by email. This could save a few days – and avoid the risk of lost post.
Is it essential to get an advance assurance? Read on
The changes to the Enterprise Investment Scheme in the November 2017 Budget relate to knowledge intensive companies. So, what’s new?
- An investor can invest £2m annually, as long as any investment over £1m is into a knowledge intensive company. The previous cap was £1m.
- The maximum a company can raise in any 12 month period has been increased from £5m to £10m.
- To determine whether a company is too old to be eligible for EIS, to start the clock ticking, the company may choose whether to use the date of its first commercial sale or the date from which its turnover exceeded £200,000.
Many were expecting the rules to be tightened up. This will still happen. Investments that will be effected are likely to be those into more stable and established companies – rather than the high risk businesses that EIS was introduced to support.
To see how EIS and SEIS are changing, you can take a look at the updates to the rules contained in the 2016 Budget here.
Obtaining an advance assurance for EIS or SEIS is not a pre requisite to make an application under either scheme once your round has closed.
The reasons for obtaining an advance assurance before taking in money from investors are to:
- ensure you can boldly tell potential investors that their investment will be eligible.
- have the document in hand to show investors when they ask.
- unearth any issues with your proposed trade, group structure or something else (if discovered before the investors wire their cash, there is a possibility to make changes).
Remember, your advance assurance is only as good as the information you provide to HMRC and any change in that information (e.g to your company’s trade, articles of association or group structure) could take your company outside of eligibility, irrespective of the fact HMRC have granted an advance assurance.
To find out when your advance assurance expires, read on!
The postal address for the central Small Company Enterprise Centre (SCEC) office is here:
Small Company Enterprise Centre (Admin Team)
Mid-size Business S0777
There is an office in both Maidstone and Cardiff but the central office will distribute to the relevant office. We have found using the central office to be best. At the local offices, post has been lost or returned to us.
For new advance assurance applications, they are all sent to Maidstone where they are allocated to the relevant team based on how complex they are.
There used to be a phone line for SCEC but now there is just an answering machine and they determine from your message whether a call back is needed!
The phone number is 0300 123 1083.
The email address is email@example.com.
You can now submit advance assurance applications by email, but EIS1 and SEIS1 must still be posted.
How long does your advance assurance last for? We get asked this a lot!
An advance assurance does not expire on a particular date and it does not last for a specified time period.
Your advance assurance is only as good as the information you provided to HMRC to grant it. If something changes, for example, your company’s group structure, trade or your articles of association, your company may fall outside eligibility, regardless of the fact you have an advance assurance in your hand from HMRC.
If you hold something back from HMRC to get the advance assurance granted, this does not mean your company is eligible. It just means that HMRC doesn’t yet know that it’s not.
HMRC makes the decision about the eligibility of your shareholders when you submit the application to claim for them after your round has closed.
They can withdraw the EIS or SEIS relief after it has been approved if they later discover anything that means the company falls outside eligibility.
Even if you’re just planning an SEIS round, when you apply to HMRC for your advance assurance, it makes sense to also ask for an advance assurance for EIS.
The two schemes are very similar, with primary differences relating to the rate of tax relief, timings for when applications may be made and financial caps.
In most other respects (big sweeping generalisation here!), where HMRC can grant an advance assurance for SEIS, in most circumstances, they can also grant one for EIS.
Although remember, your advance assurance is only as good as the information you provide to HMRC and any change in that information (e.g to your company’s trade, articles of association or group structure) could take your company outside of eligibility, irrespective of the fact HMRC have granted an advance assurance.
The start position is that a director is not eligible for EIS because they are “connected” to the company by employment.
There’s an exemption for:
- existing directors that are not receiving a salary;
- new directors who were not involved with the business before they invested.
This post deals with scenario 2.
The exemption is in place because HMRC recognises there can be value in a new investor supporting the business with advice – and perhaps more formally as a director.
For the exemption to apply and for an investment by a new director to be eligible for EIS, at the time the shares are issued, the new investor must not have been “connected” with the company nor involved in anyway in carrying on the company’s trade.
This means the appointment as director should happen after the shares have been issued.
The usual circumstances are where an investor meets a founder and wants to invest in their company. And, either the founder wants the investor to be appointed as a director or of course, the investor requires it as a condition of the investment.