What’s the SEIS / EIS Advance Assurance?
If your startup is incorporated in the UK, you’ve probably already heard about SEIS / EIS Advance Assurance. But in case you haven’t, take a look at this article.
In the UK, funding rounds are fueled by the SEIS and EIS tax relief schemes. Just to give you an idea, in the 2017-2018 tax year, a total of £189 million and £759 million were raised in the UK under the SEIS and EIS schemes respectively. A total number of 33,605 investors claimed EIS tax relief in 2017-2018. It has now helped companies raise over £20 Billion since 1994, funding 29,770 companies. You can find more Advance Assurance statistics here
How obtaining SEIS / EIS Advance Assurance will increase your odds of raising funds?
Advance Assurance is an approval from HMRC, indicating to your investors that investment in your company is likely to qualify for S-EIS tax relief. As such, Advance Assurance has become an important tool for founders who want to increase their investability. In fact, ~90% of UK angel investors won’t invest in companies that are not S-EIS eligible. So you’re looking to raise funds, Advance Assurance is likely the first document your investor will want to see.
HMRC can take up to 8 weeks to approve your application, so make sure you start applying a month or two before meeting investors. You don’t want to be in a position where you have to push back a meeting with investors just because you don’t have your Advance Assurance yet.
Applying for SEIS / EIS Advance Assurance with SeedLegals, the easy way :)
Applying for Advance Assurance can be quite complex to do alone. The good news is that applying with SeedLegals is easy, quick and efficient. It shouldn’t take you more than 15-30 minutes to complete your application on SeedLegals.
Then, you’ll send us your application for review, and our dedicated S-EIS compliance team will get back to you in 2-3 business days with our report which includes all our comments before you can send it off to HMRC. Our goal is to get you approved - so we will work closely with you to flag any issue in your application and to help you to correct them.
We are currently processing more than 10% of the Advance Assurance applications in the UK and have a 98% success rate. Just to compare, HMRC released stats last year showing that the general success rate is only 62%.
One you will get our “green light” (i.e. after we feel comfortable that your application will be approved and you’ve corrected all the issues we flagged) you will send your application to HMRC, within 2-4 weeks you should hear back from HMRC saying that you’ve been approved, congrats!
Do I need to speak with anyone to get started?
No. You can start building your application on the SeedLegals platform whenever and wherever you like- for free! If you have any questions along the way, you can always use the chat feature on the platform and our support team will reply to you in minutes!
Before we jump into the process, if you haven’t yet, make sure you’ve signed up to SeedLegals (it’s free)
Applying for Advance Assurance step by step
After logging into the platform you’ll see this dashboard. Hit ‘Funding’ > ‘S-EIS Advance Assurance’.
A new window will open on the right side of the screen. Just click on the ‘Start for free’ button.
Next, the platform will ask you ‘who’s investing’?.
Why do we ask that? In order to reduce the number of AA applications, HMRC now requires that AA applications include the details of a potential investor.
On this screen, you now see six options. In most cases the ‘Angel Investors’ option would be the right choice. But if you raise your investment from a fund, crowd-funding or Angel Investment Network, hit one of the five other options.
Next, just choose the date of your application. A good practice here is to choose today’s date.
Here, select which scheme you're applying for. If you're applying for up to £150k then only select SEIS but if you're applying for anything higher then you should select both SEIS and EIS [you can apply for both at the same time] - unless your company is not eligible for SEIS. If you’re not sure about your eligibility, have a read of this article.
Here, simply set the total number of your next funding round. For example, if you do a funding round of £350,000, that’s the number you should put in this text box.
Here you need to tell HMRC what the money you’re raising will be used for. You can choose one or more of the options, and/or add something else using the ‘Add option’ button.
Hit ‘yes’ only if you’ve got a term sheet or shareholders agreement from your investors. But if you haven’t or if you don’t have investors yet, hit ‘no’. Not to worry, it won’t affect your chances of getting approved by HMRC (most of the companies don’t have a Term Sheet or else at this point)
When you registered your company at Companies House, the Model Articles were applied by default. So if you have not changed them, just choose ‘no’ (most companies are still using the Model Articles at this point)
HMRC try to avoid artificial investments that are done just for the sake of getting S-EIS tax relief without taking on any risk. Genuinely entrepreneurial start-ups should not be affected by this provision. We suggest you to use our default wording: “The risk to capital requirement has been met, see our attached Business Plan for details”
HMRC want to understand your trading activities. Here you can choose one of two tactics, either explain in detail your activity or just refer HMRC to the attached business plan. The business plan is part of your application - no worries, you’ll get a list from us of all the documents that need to accompany your application.
Add your company’s Unique Tax Reference. You received the UTR when you incorporated your company. If you’re not sure where to find it, speak with your accountant (if you have one), or click here for guidance from Companies House. Please note you must have a UTR number to apply for S-EIS.
The Venture Capital Reliefs Team (VCRT) is the team that deals with S-EIS and tax relief schemes at HMRC. If you haven’t applied for such schemes just hit the ‘no’ button. If you have, hit ‘yes’ and HMRC will know to look at your existing correspondence (most companies haven’t dealt with the SEIS-EIS team before this application, so ‘no’ is common here)
Click on the ‘yes’ button only if your company is a subsidiary or if it’s the TopCo of a subsidiary.
Put a number here only if you or an employee are on the company’s payroll. In cases where you have part-time employees, combine their part times roles into indicative round numbers. For example, two half time employees would be equal to one full-time employee (most of the companies applying for the Advance Assurance are early stage companies, so that’s very common not to have employees at this point, in this case, please set ‘0’). Company directors also count as employees for the purpose of this test - you can see more about this here.
Choose one of the three options here. It’s important to let HMRC know your company’s accounts details, but not to worry, some early-stage companies don’t have an account at the beginning, in this case, hit ‘we don’t have a bank account yet’.
If you have not generated any revenue, that’s ok, just set this to 0 - most of the companies applying for the Advance Assurance are early stage companies, so it's very common not to have any revenue.
Choose yes only if you have received external investment in the past. These details will be reflected in your Share Register too so it is important to ensure this document is accurate and matches Companies House.
De Minimis Aid might count towards the maximum cap of £150,000 that can be raised through the SEIS scheme. If you never received such aid from the government, simply choose ‘no’. If you did receive a grant, carefully read your grant certificate and see if it affects your S-EIS allowance - it should be mentioned on your grant certificate.
Put here the value of your company’s assets, keep in mind that HMRC will only approve SEIS applications with gross assets of less than £200K (and less than £1.5 Million for EIS).
Lastly, here you can add more information to your application, an email address for communication with HMRC and your phone number. Once you finish, hit the ‘Done’ button.
Now it’s the time to add your investor’s details to the application. You just need the name and address of potential investors. No worries- inputting their details does not mean they are making any commitment to invest in your company. They are not contacted by HMRC or put on any lists.
- Please note if you have selected a corporate/crowd funding platform as an investor then you would skip this step. You will need a Letter of Engagement from corporate/crowd funding investors to attach with your application.
Hit the ‘Add Investor’ button
Click on ‘Add new investor’, or choose one of your existing investors if you have them already on the platform.
If your investors have any role in your company such as director or else, please add those roles here. In most cases, you’ll find that they don’t have any role, in which case you don’t need to check any of these boxes.
After you have added your investor/s details, you’ll need to add the amount the investors are committing to invest. This number should be a “significant amount” of the total investment. Under new HMRC guidelines we recommend that the intended investment is at least 30% of the total investment sought.
Now just hit the ‘Create’ button and the platform will generate your Advance Assurance application.
Click on the green ‘Unlock’ button to download your application.
We charge a fixed fee of £300+VAT for the Advance Assurance application, cover letter, and our in-depth review of your supporting documents: the pitch deck, financial projections and of course our unlimited support from our S-EIS Compliance team.
Next you can go ahead and create your Cover Letter, by clicking on the ‘Create’ button.
And now you really are done!! Great job!
Here you can see a list of all the documents you'll need to send us for our review to make sure it all goes smoothly. So download your completed Advance Assurance form, your Cover Letter as PDFs, your pitch deck and financial projections and send them to [email protected]. Stay tuned, we will review everything and will send you our detailed report so you can send it to HMRC and get approved.
It takes us 2-3 business days to send you back our feedback on the application. And then, all you have left to do is to send all the reviewed documents for HMRC to [email protected] .