Obtaining SEIS Advance Assurance is a complex, time-consuming, but nevertheless vital process that most companies go through in order to succeed under the scheme and benefit from the variety of tax reliefs offered to investors. In this article, we provide an overview of the scheme, the importance of HMRC Advance Assurance, and how your company can proceed with obtaining it.

What is SEIS Advance Assurance?

Before understanding how SEIS Advance Assurance operates for businesses and their investors, it is first necessary to define SEIS. The SEIS stands for Seed Enterprise Investment Scheme and was established by Her Majesty’s Revenue and Customs (HMRC) to encourage greater investment in seed-stage and growth-focused companies, as well as support entrepreneurship by providing income tax relief to UK taxpayers.

The benefits of this scheme specifically aim to stimulate greater investment in early-stage companies by providing prospective investors with income tax relief at a rate of 50% on the value of the investment. In addition, investors can also benefit from Capital Gains Tax (CGT) relief within SEIS.

However, these benefits to investors are contingent on the companies qualifying as eligible under the SEIS scheme, which can only be granted by HMRC after the investments are made. SEIS Advance Assurance, as its name suggests, therefore allows companies to receive a provisional indication from the HMRC that their company is eligible to apply for tax relief for their investors. In turn, this provides investors with assurance that the company they invest in should be eligible to offer the various tax benefits stipulated under the SEIS scheme before they choose to do so.

What is the difference between SEIS and EIS?

While both the SEIS and EIS are government-backed venture capital schemes designed to help small to medium-sized companies and social enterprises grow by attracting investment, they differ in terms of the size of the company that each scheme caters to, as well as the tax benefits specifically that are on offer.

The SEIS, as previously mentioned, is designed for very early-stage startups looking for seed investment. With a maximum cap of £150,000, this scheme is designed for initial “friends and family” rounds. Alternatively, The EIS, which simply stands for Enterprise Investment Scheme, is appropriate for larger investments made towards bigger companies – operating for up to 7 years and raising up to £12m.

How do you qualify for SEIS and EIS?

Before you can present your investors with proof of Advance Assurance from HMRC, you will need to make sure that your company qualifies for one or both of the schemes. Qualification under both schemes, as mentioned above, is based on how early-stage your company is and how much money you have already raised. The table below summarises the position under both schemes.

SEIS	EIS
Maximum raise of £150,000.	Maximum raise of £5m in any tax year. A lifetime amount of £12m (or £20m for ‘knowledge intensive’ companies).
You must spend the money on a ‘qualifying trade’ (see below).
Trading for less than 2 years.	Trading for less than 7 years, (or 10 years for ‘knowledge intensive’ companies).
Less than 25 employees.	Less than 250 employees (or 500 for ‘knowledge intensive’ companies).
Gross assets up to £200,000.	Gross assets up to £15m.
Your company must be ‘permanently established‘ in the UK, (see below).

How do you get SEIS Advance Assurance?

Application forms for obtaining SEIS Advance Assurance will need to be submitted directly to the HMRC who will assess whether your company meets its criteria for SEIS eligibility; this process generally takes up to 6 to 8 weeks. This process can be both complex and time-consuming, but is nevertheless vital to obtaining the assurance that your investors value, so it’s important that you do it right. At Zegal, our expert team is significantly experienced in dealing with HMRC processes and can assist you with constructing your application for obtaining SEIS Advance Assurance before your first round.

However, if you are planning to handle the application for Advance Assurance yourselves; it is important you note the following details that will need to be provided to HMRC:

Details of the fundraise and the latest draft of any documents you use to explain your proposal to potential investors;
The name and address of any prospective investors (the single most important step);
Your business plan and financials;
If you are a group, which companies in the group will use the investment;
Details of all trading and activities to be carried out, and how much you expect to spend on each activity;
A list of the amounts, dates and venture capital schemes under which you’ve previously received an investment;
An up to date copy of the memorandum and articles of association and details of any changes you expect to make;
A copy of the register of members from the date you apply for advance assurance;
Details of any other agreements between the company and the shareholders;

Do you need SEIS Advance Assurance?

While obtaining SEIS or EIS Advance Assurance is not mandatory or legally required by HMRC and your financing round can take place without offering it to your investors, it is highly recommended that your company applies for it as most investors insist on seeing a company’s Advance Assurance before they commit to making an investment. As SEIS tax reliefs are advantageous and important to investors, presenting an HMRC Advance Assurance letter as evidence can greatly improve the chances of them deciding to invest in your company.

Ensure that your company is well-positioned to operate under the SEIS scheme and provide your investors with security and confidence in their investments by completing the SEIS Advance Assurance application process. Allow Zegal to simplify this process for you by referring to our plethora of resources available on both the SEIS and EIS or contact us directly so that our team of experts can construct a bespoke Advance Assurance application for you.

READ MORE: Raise money through SEIS/EIS

DOCUMENT: Shareholders Agreement

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