SEIS Advance Assurance HMRC Pre-Approval

The Seed Enterprise Investment Scheme (SEIS) arguably offers some of the best tax reliefs for investors out of any government-backed investment program.

SEIS investors pick up tax breaks when they put money in and when the three-year investment ends.

But HM Revenue & Customs (HMRC) applies strict rules to how companies and investments qualify for the reliefs.

So how do investors know if a company is set up to comply with SEIS rules?

Does the SEIS company have advance approval from HMRC?

Advance Assurance makes a pitch from an entrepreneur much more inviting because investors are more confident they can pick up the full tax breaks offered by the scheme.

Companies do not have to ask HMRC for advance approval, but without the green light, the investment is a riskier bet because the deal may fail one of the compliance hurdles once the SEIS shares are issued and an application to join the scheme is filed.

Do not take an entrepreneur’s word that they have the approval. To get the nod from HMRC, they have to submit details of the company and proposed business in writing.

The application allows the company to allay any investor concerns prior to issuing shares, so the investor does not have to commit to taking a stake in the business at an early stage.

Investors cannot apply for Advance Assurance; the request has to come from the company’s director or secretary, unless they have given written permission to a third party to ask.

Is the approval relevant to the SEIS share issue?

If the details have changed since the application was sent to HMRC, the company has to go through the process again in case the new deal does not comply with SEIS rules.

Keeping investor identities confidential

The Advance Assurance application does not have to identify the investors, just the details of the proposed SEIS offer, so investors can maintain privacy. Approval does not take into account who is investing and why but whether the company meets SEIS qualification rules.

“The information on the application is the basis of an HMRC opinion of whether the company is likely to gain SEIS approval,” says the HMRC web site.

“It’s not part of the process to identify subscribers to any share issue, not will the approval guarantee they will receive any tax reliefs under the scheme.”