Documents for Business

In excess of 1,000 customisable documents covering every conceivable business issue.

Introduction to this document

EIS advance assurance letter

If you’re looking to raise money from private investors, you may do this via a share issue. If your company is a trading company, you might be able to apply to have the shares issued under the enterprise investment scheme (EIS). This means the investors can access a number of tax reliefs which act as an incentive for the investment. Use our letter to write to HMRC seeking assurance this relief will be available.

When can you request advance assurance?

For EIS to apply, there are a number of conditions your company needs to meet under Chapter 5 Income Tax Act 2007. It is not unheard of for companies to issue shares only to have relief denied for issues that come to light later on.

In order to avoid this, HMRC’s small companies and enterprise centre (SCEC) offers an advance assurance (AA) service, where you can obtain a formal opinion as to whether your company meets the conditions for EIS ahead of the investment taking place. This gives you the opportunity to change anything that would prevent EIS relief from being available.

Example

Acom Ltd is looking to issue some shares under EIS and requests an AA from HMRC. It sends its articles for review. Unfortunately, the articles contain anti-dilution clauses which are worded in such a way as to constitute a pre-arranged exit, and so the company would not qualify. The company amends its articles to ensure the clauses do not apply to the prospective EIS shares before issuing the new shares.

HMRC will usually follow its assurance opinion - as long as all relevant information has been supplied - however, it is important to note that it is not binding, and a positive AA should not be used as an indication of a guarantee when marketing your company to prospective investors. The AA only considers the conditions relating to the issuing company, and not the other conditions which apply to the individuals; these will be considered in turn upon the formal application for EIS after the investment.

How to make the request

Write to the SCEC setting out the circumstances around your potential investment, what the money is to be used for, etc. Obviously, you need to do this before the investment, so there is no time limit or deadline.

You might find it quicker to e-mail the letter to the SCEC at enterprise.centre@hmrc.gsi.gov.uk.