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Apply for SEIS/EIS Advance Assurance - a step by step guide

Published:  Jan 5, 2018
Jack Dunning
Jack Dunning

At SeedLegals we’ve helped hundreds of UK startups secure SEIS/EIS Advance Assurance from HMRC. We know it can be hard to navigate what’s needed for a successful application and any mistakes mean you have to reapply which can set your funding round back weeks or months.

So we put together this handy step by step guide on how to apply. We update this post regularly so you know it’s always up-to-date with the latest SEIS/EIS application rules from HMRC.

Do your SEIS/EIS Advance Assurance application on SeedLegals and our team will ensure you have everything you need for a speedy acceptance.

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 (if you haven’t received VCS investment before)

If you haven’t previously received Venture Capital Scheme investment, you need 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 issue 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 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. 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

9. Create and submit your application

After you’ve gathered all your documents and information, you can apply directly through HMRC using their online portal. You can also create your application with SeedLegals. Our combined expert support and automated workflow help to streamline the process. Our SEIS experts are with you every step of the way and can guide you through the process from start to finish – unlimited support is included at no extra cost. At the end of the process once your documents are finalised, we will also submit on your behalf on HMRC’s website! It’s free to sign up and get started.

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 about the SeedLegals SEIS/EIS Advance Assurance service or book some time with an expert here.

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