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How to Apply for SEIS & EIS Advance Assurance - A Step by Step Guide

Updated: Jan 20

Insights by SeedLegals


You’ve just launched your company: you’re busy working on your product, trying to gain traction, seeking feedback from early-stage users so you can refine the customer experience and your value proposition. You now need investors who will buy into your vision. That’s where the SEIS & EIS Advance Assurance comes into play. As a seed-stage business, angel investors may see you as a high-risk investment – but with the tax relief benefits offered through SEIS & EIS they could be ready to take the plunge


What is SEIS & EIS Advance Assurance?

The Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) are two of a number of UK government initiatives which encourage innovation by granting private investors a significant tax break when investing in early stage, ‘high-risk’ companies.



How to apply for SEIS/EIS Advance Assurance


1. Check you qualify Most companies/products qualify for SEIS and EIS funding, but there are a number of activities excluded from the schemes entirely. First thing to do is check whether your company operates in any of the HMRC excluded activities. The excluded trades include those dealing in land or commodities, those involved in banking, insurance or money lending, those providing legal or accountancy services, those involved in property development, and those generating and exporting electricity, producing coal and steel, or shipbuilding. If your company is involved in any of those activities then don’t worry, you still might qualify. HMRC requires a substantial element (>20 %) of the companies trade activity to be included in the restricted area. You also need to be directly providing the restricted services to be disqualified from SEIS/EIS, for example, building a technology platform to service financial companies would still qualify. There are also a number of eligibility criteria that will need to be checked before making the SEIS/EIS application, including:


  • Must have under £200,000 in gross assets pre-money to qualify for SEIS and under £15 million gross assets pre-money (i.e. not including the new funding) to qualify for EIS

  • ​Must have under 25 employees to qualify for SEIS and under 250 employees to qualify for EIS

  • ​Must have been trading for less than 2 years up until the time you issue SEIS shares, and less than 7 years up until the time you issue EIS shares

  • ​Must have a permanent establishment in the UK

  • ​Must not be a Limited Partnership (LLP) company


2. Are you also a Knowledge Intensive Company (KIC)? You qualify as a Knowledge Intensive Company (KIC) if your operation expenditure includes research, development or innovation expenses, you are developing intellectual property that’s going to be your future main source of business, or you have a percentage (> 20%) of employees carrying out research in a role that requires a Master’s degree or higher. If you think that could be you, it’s worth being aware of the benefits which are: -Raise up to £10 million through EIS per year (instead of £5 million) and raise a total of £20 million through EIS in the company lifetime (instead of £12 million) -You will qualify for EIS within 10 years from the start of trade (instead of 7 years) -You will qualify with up to 500 full-time employees (instead of 250 employees) There is however no need to worry about it unless you need these extra EIS benefits now, you can always apply for KIC status later when you need it! 3. Make sure you have your company’s Unique Taxpayer Reference (UTR) number You should automatically get sent your company’s UTR number when you register with Companies House. If you cannot find it, you will need to request it online. This process can take about a week so it’s good to find this number in advance of starting the Advance Assurance application. 4. Create your business plan and financial forecast In January 2018 HMRC changed the rules on SEIS/EIS Advance Assurance applications, and you now need to to include a 3-year business plan and financial forecast at the same level of detail that you would ordinarily provide to investors (think investor pitch deck). If you already have one great, just submit it like it is! If you need to create one, then don’t worry about going into detail, you just need to summarise the company’s business activities, financials, and plan for future growth. 5. Find the name of at least one investor All Advance Assurance applications have to include the name of at least 1 investor and an intention to invest at 30% or more of the total SEIS/EIS Advance Assurance you’re applying for. This is a bit of a chicken and egg situation because you need to know who your investors are before obtaining Advance Assurance and the investors will often only commit to investing after you have obtained your Advance Assurance! However don’t worry, the investor names and amounts don’t need to be committed, and you can change the name of the investor and their investment amounts at any time. But don’t make it up, find investors who are on balance likely to invest. 6. Find out when your company started trading To qualify for SEIS, the date you started trading must be within 2 years of the date of issue of the SEIS shares. For EIS share issues this time limit is 7 years (and for a Knowledge Intensive Company the time limit moves up to 10 years). To define trading HMRC use the analogy of a shop: if you have something on the shelf that someone could buy even if they don’t, you can turn the sign to “Open” and that’s you trading. This is quite an ambiguous definition! So when quantifying the date of trading it is important to note: The start date of trading will often be the date you first received revenues, if not before It will almost always be different from your date of incorporation If you haven’t started trading yet then great! If you demonstrate this in the attached documents in your application this won’t cause any issues


7. Find out if you have received any de minimis aid De minimis aid (state grants that are given and considered too small to affect competition) received in the 3 years up to and including the date of the SEIS investment will count towards the maximum cap of £150,000 that can be raised through the SEIS scheme. De minimis aid usually comes from government or university grants (except Innovate UK, this is normally excluded). For example, if you received a £100,000 grant this will have to be declared when making your SEIS/EIS Advance Assurance application. The maximum amount you can receive in SEIS investments will be reduced to £50,000. Whether or not the aid you received is “de minimis” is really judged on a case by case basis. They usually make it clear at the time of issuance if you have received de minimis aid, so you should know if you have. And if you have, you just need to submit the details of the aid along with your application. 8. Fill out the HMRC Advance Assurance Application Form (VCSAA v1.0) Once you have collected all the information above you will need to fill out the application form. This bit is pretty easy! If you are doing the Advance Assurance Application through SeedLegals you can easily access, fill out, save and download the form from our platform! 9. Write a cover letter At SeedLegals we have helped hundreds of startups secure Advance Assurance. From our experience we’ve found it helps to include a cover letter in your application that makes all the important information easy to see for the reviewer. We recommend you include information such as: -Summary of the company -Upcoming and existing funding round documentation and details -Investor details -Company financial summary The cover letter is another feature that, if you do your Advance Assurance application through the SeedLegals platform, we will automatically create the document for you. 10. Check all the documentation If you’re doing an Advance Assurance application on the SeedLegals platform, our team will ensure you have everything in place. We get sent Advance Assurance applications to review every day, so we know what things HMRC are looking out for - the things that HMRC neglect to tell you on their website. Remember to include your application form and all the additional documentation you need for the application including: -Business plan -Financial forecast -Bank statement/accounts -Information about grants/previous investments -Cover letter

11. Email the documents to HMRC Once you have all the documentation and they have been successfully reviewed, well done! Email them all to HMRC at enterprise.centre@hmrc.gov.uk. In our experience emailing is a faster way of getting your application processed and usually knocks about a week off of the wait time. And once you have emailed you can sit back and wait. Your application should be processed in roughly 3-6 weeks (if you do your Advance Assurance through SeedLegals it can be as fast as 1 week).



Need some help? Find out more at SeedLegals.