Securing advance assurance: what to submit to HMRC

Securing advance assurance from HMRC is a crucial step for startups looking to fundraise through the Seed Enterprise Investment Scheme (SEIS), or the Enterprise Investment Scheme (EIS). 

It’s a reassurance to investors that their investment in your company is likely to qualify for tax relief, making your business more attractive. 

But to apply, HMRC requires certain criteria and information to be met. So what exactly do you need to supply to HMRC to have the best shot at approval?

Corporation tax number

This is your unique tax reference number, issued to you by HMRC when you register for business corporation tax. It helps HMRC to verify your tax status and ensures your business is recognised.

Business plan

Your business plan is essential in demonstrating your company’s viability, growth potential, and compliance with SEIS/EIS rules. It should include:

• Growth plan: How do you plan on scaling your business?
• Business model: How do you generate revenue and maintain profitability?
• Competitor landscape: Who are your competitors, and what makes you stand out?

This proves to HMRC that you have a legitimate plan in place for your business, and doesn’t exist purely for the tax advantages provided by SEIS and EIS.

This will also provide insight into how your business meets the risk-to-capital conditions as set out by HMRC, which is an essential component of SEIS/EIS.

Financial forecasts

Detailed financial projections are expected by HMRC, and these should cover at least 3 years after the investment period.

These should outline your revenue expectations, and your projected costs and margins. These figures should align with your business plan, assuring investors and HMRC that your company has a realistic growth trajectory.

Investment details

HMRC will ask for specifics about your funding round. This will include:

• The amount you are raising
• The share class being offered to investors
• How the funds will be used (product development, marketing, hiring, etc.)

This ensures that the funding round is covered by HMRC, and that it fits within their criteria. 

The funds must fall within the limits of SEIS or EIS, the shares offered must be eligible, and the funds must be used for qualifying activities that support growth and development.

Investor details

You will need to provide information on how much of the total raise is covered or expected to be covered by named investors. This is to ensure the fundraise is realistic, and investor interest has already been expressed, avoiding speculative applications. 

Trading activities

Your business must be involved in a qualifying trade under SEIS/EIS rules. To show this, outline: 

• Core operations and your revenue model
• The industry you will be operating in
• Any potential disqualifying activities (e.g., property development, financial services, legal services*)

SEIS/EIS has strict rules on the industries in which the schemes can be applied, but this can be difficult to consider if your business has mixed activities.

Most of your business activities should be within qualifying trades, which is categorised by HMRC as being more than 20%. If a company is a parent company, its subsidiaries must also be qualifying by the same proportions.

Memorandum and Articles of Association

These official documents are key for HMRC to analyse, as they outline the legal structure and governance of your business. They want to check: 

• Your share structure aligns with SEIS/EIS rules
• Investor rights are compliant with HMRC’s guidelines

Why does HMRC need all of this?

HMRC are not just trying to make your life difficult. They are carefully assessing eligibility, ensuring:

• You are a genuine trading company, and not just set up for tax benefits
• You have strong growth potential, making it a worthwhile investment under SEIS/EIS
• You meet all compliance requirements, so investors can receive their tax relief without future complications

Secure advance assurance with InVestd Raise

Navigating SEIS and EIS can feel complex, but you don’t have to do it alone. With InVestd Raise, we guide you through the process, ensuring your advance assurance application meets HMRC requirements whilst giving your business the best chance for success.

From eligibility checks to application submissions, and dealing with all HMRC correspondence, we take care of the heavy lifting so you don’t have to.

Unlock the benefits of SEIS with expert guidance—book a call today to see how we can streamline your fundraising journey.