SEIS and EIS advance assurance: documents, timelines and rejection reasons

What to take away

What HMRC is testing when it reads an advance assurance application

HMRC is not approving your business. It is checking whether a proposed share issue would qualify for the venture capital schemes if you go ahead. That means the application has to describe the company as it is, the shares you plan to issue, and the money you expect to raise.

The core test is whether the company will be a qualifying company at the time of the share issue and for the three years after. HMRC looks at the trade, the assets, the subsidiaries and the ownership structure. If any of those points fail, the shares will not qualify for relief.

HMRC also checks the investor side. It wants to see that the shares will be ordinary shares, paid in cash, and that the investor will not be connected to the company in a way that blocks relief. The checks HMRC performs before granting advance assurance cover both sides of the transaction.

A common mistake is to treat advance assurance as a tax clearance for the founder. It is not. It is a view on a specific proposed share issue, based on the facts you provide. Change the terms or the use of funds and the assurance may no longer apply.

HMRC does not audit the company at this stage. It reads the application and decides whether the proposal is consistent with the rules. That is why the quality of the documents matters more than the length of the business plan.

The SEIS and EIS eligibility conditions behind every HMRC check

SEIS and EIS share a family of conditions, but the limits and the stage of company they suit are different. Getting the scheme wrong at the start is one of the most common reasons a fundraise stalls.

SEIS is for early-stage companies. The company must be less than three years old when the shares are issued, have fewer than 25 employees, and have gross assets of no more than £350,000.

SEIS can raise up to £250,000 in a company's lifetime, as the SEIS eligibility criteria, limits and advance assurance page sets out.

EIS is for larger or later rounds. The company must have fewer than 250 employees and gross assets of no more than £15 million before the share issue and £16 million after.

EIS can raise up to £5 million a year and £12 million in its lifetime, with a higher limit for knowledge-intensive companies, as the EIS eligibility and company-side advance assurance page sets out.

Both schemes require the company to carry on a qualifying trade. Most trades qualify, but some do not: dealing in land, financial activities, leasing, and running a hotel or care home are excluded. A trade that is less than three years old can still qualify if it is a new qualifying trade.

Both schemes also require the company to be unquoted, to have no more than £15 million in state aid, and to use the money for growth and development. The company must not be controlled by another company, and it must not have any subsidiary that is not a qualifying subsidiary.

SEIS and EIS are two of the venture capital schemes in the EIS and SEIS guide, which covers the British Business Bank's regional funds and the Enterprise Investment Scheme Association's guidance.

The rules are strict on the use of money. Working capital is fine, but buying shares in another company or paying off loans is not. HMRC will ask what the money is for, and the answer has to match the trade.

Documents and forecasts HMRC asks for, from business plan to share structure

HMRC expects a pack, not a single form. The application is made through the advance assurance service, and the documents you attach do most of the work. Missing documents are the main reason HMRC comes back with questions.

The business plan should explain what the company does, who its customers are, and how it will grow. It does not need to be long. Two to three pages of clear narrative, with a simple financial model, is usually enough. HMRC is checking that the trade is qualifying and that the money will be used for growth.

Financial forecasts should cover at least three years. They need to show revenue, costs, profit and cash flow, and they should be consistent with the amount you plan to raise. If the forecasts show a large loss with no route to profit, HMRC may ask how the company will trade on a commercial basis.

The share structure is where many applications fall down. HMRC wants to see the current cap table, the proposed new shares, and the rights attaching to them. If the company has convertible loan notes or share options, include the conversion terms and the fully diluted cap table, because these can affect the share structure.

The application also asks for details of the company's subsidiaries, any previous SEIS or EIS issues, and the amount of state aid received. If the company has already raised under the schemes, HMRC will check that the lifetime limits are not breached.

A completed checklist helps:

If the company has advisers, they should review the pack before it goes in. A second pair of eyes catches inconsistencies between the business plan and the forecasts, which HMRC will notice.

Step by step through the advance assurance application route

The application is made online through HMRC's venture capital schemes service. You do not need an agent, but most founders use one. The process is the same for SEIS and EIS, though the questions differ slightly.

The steps are:

Answer any HMRC queries and wait for the decision letter.

The service is part of the wider HMRC collection of venture capital scheme guidance, which includes forms, statistics and detailed manuals. Bookmark it before you start.

If you are raising from a syndicate, tell HMRC the names of the lead investors and the structure of the round. Advance assurance is given to the company, not to the investors, but the terms of the round affect whether the shares qualify.

Once you have assurance, you can raise with more confidence. But the assurance is not a guarantee. If the facts change, the relief can be withdrawn. Keep the application and the final share issue consistent, and keep the application, assurance letter and final documents together, as the EIS statements guide on compliance records sets out.

Typical decision timelines and what causes delay

Most straightforward applications get a decision within four to six weeks. HMRC aims to respond within 28 days, but complex cases take longer. The detailed investment schemes collection explains the service standards and the information HMRC needs.

The biggest cause of delay is an incomplete application. If HMRC has to ask for missing documents, the clock restarts. That is why a complete pack, with a clear summary, saves weeks.

Another common delay is a change in the proposal. If you revise the share price or the amount to be raised after submitting, HMRC may need to review the application again. Decide the terms before you apply.

Seasonal peaks matter too. Applications rise before the end of the tax year, when investors want to use their annual allowances. Applying in the autumn is usually faster than applying in March.

If your company has an unusual structure, such as a holding company or a joint venture, expect more questions. HMRC will want to see how the structure fits the rules, and that can add weeks.

If you have not heard back after six weeks, chase the caseworker. Quote the reference number and offer to provide any missing information. Polite persistence works better than a fresh application.

Why advance assurance claims are rejected, and how to fix them

Rejections are rarely about the quality of the business. They are about the rules. Most refusals fall into a few categories, and each has a fix.

The first is an ineligible trade. If the company deals in land, provides financial services, or runs a hotel, it will not qualify. The fix is to restructure the trade or accept that the scheme is not available.

The second is a subsidiary that is not a qualifying subsidiary. If the company owns a subsidiary that does not meet the rules, the parent may fail. The fix is to remove the subsidiary from the structure or to ensure it qualifies.

The third is the share rights. A company with 100,000 ordinary shares worth £1 each issues 20,000 new shares with a 2x liquidation preference. HMRC treats those shares as not ordinary, so the advance assurance fails.

The fix is to amend the articles or term sheet so the new shares rank equally with the existing ordinary shares, then reapply with the revised cap table.

The fourth is the lifetime limit. If the company has already raised close to the SEIS or EIS limit, further issues may not qualify. Check the cumulative figures before applying, and consider EIS if SEIS is exhausted.

A rejection is not the end. HMRC usually explains the reason, and you can reapply once you have fixed the issue. The eligibility to the whole bargain matters here: a clean structure and clear terms are easier to defend.

If the rejection is about a point of interpretation, take advice. EISA members and tax advisers see these cases often, and a short call can save a long exchange with HMRC.

Keeping advance assurance wording consistent with the term sheet

Advance assurance is based on the terms you describe. If the term sheet changes, the assurance may not cover the final deal. Consistency is not a formality; it is what protects the relief.

The most common mismatch is the share price. If the term sheet sets a different price from the one in the application, the number of shares and the amount raised will differ. That can affect the limits and the investor's relief. This is why the share price should be fixed before the application goes in.

For example, an application states a £1.00 share price for a £150,000 raise. The term sheet later sets £1.20. The same £150,000 now buys 125,000 shares instead of 150,000. Check the SEIS limit against the higher price before you sign.

An increase from £150,000 to £200,000 can push a SEIS round over the £250,000 lifetime limit if the company has raised before.

Advisers should compare the assurance letter with the final documents before completion. A short table helps:

If the changes are material, tell HMRC. In some cases, a fresh application is needed. In others, a short letter confirming the change is enough. The authority and cash checks you would apply to any fundraise apply here too.

Keep the assurance letter with the company's statutory books. If HMRC later queries the relief, you will need to show what was agreed and when.

Where EISA guidance and HMRC manuals diverge in practice

EISA publishes practical guidance for members, and HMRC publishes the manuals that decide cases. Most of the time they agree. Where they differ, it is usually about emphasis or timing.

EISA tends to focus on what investors need to know: how to claim relief, what records to keep, and how to handle a rejection. HMRC focuses on the conditions the company must meet. Both are useful, but they answer different questions.

One area of divergence is the treatment of follow-on rounds. EISA guidance often assumes a clean SEIS round followed by EIS. HMRC may look at the whole history, including any shares issued before the scheme application.

Another is the use of funds. EISA material sometimes describes broad categories of expenditure, while HMRC expects a specific description tied to the trade. Founders should follow the stricter reading.

A third is the timing of the assurance. EISA may suggest applying early, before the terms are fixed. HMRC needs enough detail to make a decision, so an early application with vague terms can lead to questions.

The practical answer is to use EISA guidance for the investor conversation and HMRC guidance for the application. Where they conflict, follow HMRC. The UK regulatory questions guide covers company law and tax reporting points that apply to both schemes.

If you are unsure, ask an adviser who works with both.

Common questions