We have already written about some of the requirements necessary for a company to check whether they qualify for the SEIS. Once these requirements have been confirmed, an application must be made to HMRC for formal approval of the tax relief via an SEIS1 form.
This assurance will help new start-up companies to attract investment to help build a successful business. The investors will benefit from the tax advantages of making a qualifying SEIS investment and hopefully help fund a growing business.
HMRC offers companies the facility to apply for advance assurance that a proposed issue of shares will qualify for SEIS relief. This advance assurance although not mandatory is important for both the company and even more so for the prospective investor.
Prior to January 2018, any company could make an application to HMRC for advance assurance. However, HMRC now requires the application to include the names of some potential investors on board who are ‘likely’ to invest if advance assurance is granted. This change has been made to cut down on speculative applications and to attract more serious applications. Of course, this has the advantage of cutting down on the time it typically takes for an application to be processed. There is nothing in the rules to say that the potential investors cannot be changed when the SEIS shares are issued.
HMRC usually takes around 4 weeks to issue advance assurance on a relatively straightforward application. However, the timeframe for receiving an answer can be longer especially if the application is complicated or if HMRC requires additional information.
There are many risks to investing in early-stage potentially high growth businesses and at the very least investors want to know that their investments will benefit from the advertised tax breaks. This can be very difficult without having advanced assurance in place.
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