SEIS advance assurance: how long it takes and what HMRC asks

Advance assurance is HMRC’s opinion, based on what you have told it, that if you do what you say you are going to do and later submit the compliance statement, it would authorise you to issue SEIS3 certificates to your investors for that particular share issue.

Three things follow from that, and they matter more than founders expect.

• The service is discretionary and non-statutory. There is no right of appeal if the venture capital reliefs team says no.
• The opinion covers one proposed issue of shares. A different raise later needs its own application.
• It says nothing about whether a specific investor qualifies. Investors have their own conditions to meet, and relief can still be withheld from them personally.

You are also not required to have it before you issue shares. Plenty of companies raise without it. In practice, angels and syndicates ask for it because it removes the main thing they are worried about, so founders go and get it. That is the honest reason it exists in your timeline. You can read the detail of how we handle this on our SEIS and EIS advance assurance page, or on HMRC’s own guidance.

HMRC does not promise a turnaround on advance assurance. It publishes where the venture capital reliefs team has got to with its post, so before you tell an investor a date, go and look at the current position rather than repeating what a founder told you at a demo night last year.

Plan in weeks, not days. Two practical points make the difference between a clean run and a long one.

First, the company has to exist and have its Unique Taxpayer Reference from HMRC before you can apply. If you incorporated last week, that reference is still in the post, and nothing can start until it arrives.

Second, the busy periods are real. Applications pile up as the tax year end approaches and investors try to get money in before 5 April, so a January application and a July application do not behave the same way.

If an agent is applying for you, HMRC wants a signed authority letter from the company dated within the last three months, sent with every new application. An out of date letter is a wasted fortnight for no good reason.

HMRC is deciding whether a real investment, into a real company, on terms you have actually agreed, would meet the rules. The pack has to let a stranger reach that view without ringing you up. Expect to provide:

• Your business plan and financial forecasts.
• Your latest accounts, if you have filed any.
• Your memorandum and articles of association, and the proposed terms of the share issue.
• Details of the investors you are talking to. HMRC usually wants names, so a raise with nobody attached to it is a problem.
• How much you intend to raise and exactly what the money will be spent on.
• Your structure, including any subsidiaries or other companies the founders control.
• An explanation of how you meet each condition, in your own words.

You also confirm that you will be able to sign the statutory declaration on the compliance statement once the shares are issued.

The part founders skip is the last one in HMRC’s own manual: flag anything you are unsure about. If you leave something out and HMRC later finds it, the assurance is not valid, which is a worse outcome than a question at the application stage.

Most refusals and most delays come from a short list, and almost all of them are findable before you press send.

• No investors named. HMRC will not give advance assurance on a speculative application from a company that has never taken investment under one of these schemes and cannot point to anyone who is interested.
• The trade is too old. If the qualifying trade has already been carried on for more than three years, by you or by whoever transferred it to you, SEIS has gone.
• Gross assets. The company and any subsidiaries cannot have gross assets above £350,000 when the shares are issued. Founders who have already banked a chunk of revenue sometimes discover this late.
• Earlier money. A company that has already taken EIS money or investment from a venture capital trust cannot then use SEIS.
• Vague use of funds. General working capital is not an answer. Say what the money buys and when.
• The ceiling. SEIS tops out at £250,000, counting other de minimis state aid in the three years to the investment date.

There is also a size test, under 25 full-time equivalent employees at the point the shares are issued, which rarely bites at seed but is worth a glance if you have been hiring hard.

Assurance in hand, founders relax. The conditions keep running for three years after the investment, and if the company stops meeting them in that window, relief is withdrawn from the investors who backed you. That conversation is unpleasant, and it is the one thing that genuinely damages a founder’s reputation with an angel network.

Three things to hold on to after the letter arrives:

1. Spend the money within three years of the share issue on the qualifying trade, on preparing to carry it on, or on research and development expected to lead to it.
2. If your articles, your plan or your terms change after HMRC gave its view, send the updated documents. The assurance was given on what you showed them.
3. Once the shares are issued, the compliance statement is what actually produces the SEIS3 certificates your investors need for their own tax returns. Nobody gets relief from the assurance letter alone.

And while you are in this part of the tax code, it is worth looking at the rest of it. Companies building software for the first time usually have an R&D claim sitting there, and if there is registered intellectual property coming, patent box is the next conversation.