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SEIS EIS Published: 
Oct 22, 2019
Updated: Apr 12, 2023
8 min read
Expert reviewed

How to apply for SEIS/EIS Advance Assurance

SEIS/EIS Advance Assurance reassures your investors that they’ll get tax relief in return for supporting your company. That makes it a very useful tool in your talks with potential investors. In fact, by our calculations, two thirds of angel investors won’t even consider investing in companies that don’t have their SEIS/EIS Advance Assurance.

In this post, we’ll explain the steps involved in creating your application, the documents you need and the mistakes to avoid.

 

SEIS/EIS fundamentals

The Seed Enterprise Investment Scheme (SEIS for short) and the Enterprise Investment Scheme (EIS) are two of the UK government’s venture capital schemes.

These schemes reward private investors who invest in early-stage companies by giving them tax relief on their investment.

SEIS or EIS?
SEIS and EIS are designed for early companies at different stages of growth. Find out whether your company qualifies and which scheme is right for you in our essential guide to SEIS and EIS.

These schemes are so popular in the UK startup scene that many investors expect companies to be pre-approved by HMRC before they consider parting with any money. The pre-approval is called Advance Assurance.

At SeedLegals we’re experts at helping UK startups secure SEIS/EIS Advance Assurance from HMRC. We know it can be hard to navigate what’s needed for a successful application, especially considering that any mistakes mean you have to reapply which can set back your funding round weeks or even months.

To help you get started, we put together this 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.

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How To Apply For Seis Eis Advance Assurance

1. Check you meet the SEIS/EIS eligibility criteria

SEIS and EIS are designed to support newer, and riskier, companies by making it more attractive to invest in them.

For this reason, your company has to be under a certain size and stage of development to qualify. You can find full details about the eligibility criteria in our guide to SEIS and EIS. Here’s a quick summary of the most important current* eligibility criteria:

  • The current value of your company. For SEIS, you must have under £350,000 in gross assets pre-money (ie, not including funds from new investment) to qualify for SEIS. For EIS, you must have under £15 million in gross assets.
  • Your employee headcount. For SEIS, you must have under 25 employees and for EIS, under 250 employees.
  • How long you’ve been trading. For SEIS, you can only have been trading for less than two years by the time you issue SEIS shares. For EIS, you have seven years from the date of your first commercial sale to issue shares.
  • You must have a permanent establishment in the UK.
  • Your company must not be a Limited Partnership (LLP).

 

You can now raise more, and for longer, with SEIS

The UK government plans to extend the SEIS criteria so that more companies can benefit. From April 2023, the SEIS limits are £350,000 in gross assets, three years of trading and you’ll be able to raise up to £250,000 in SEIS investment.

These changes haven't yet been written into the law. HMRC won’t give Advance Assurance or approve share issuances for the increased limits until the Finance Bill receives Royal Assent - we expect this to happen in July 2023.

Find out more about the SEIS changes »

Raise £250k in SEIS now, leave compliance until later

SeedLegals CEO Anthony Rose explains how to make the upcoming SEIS changes work for you, starting right now.

Read more
Pop art image for £250K

As well as the above, your company might not be eligible for SEIS or EIS if your company directly operates in any of HMRC’s excluded activities. The excluded trades include:

  • dealing in land or commodities
  • banking, insurance or money lending
  • legal or accountancy services
  • property development
  • generating and exporting energy and electricity
  • producing coal and steel
  • shipbuilding

Your level of involvement in the excluded activities affects whether or not you can still qualify for SEIS/EIS. To be disqualified, a substantial percentage of your trade activity (more than 20%) has to be in the restricted area.

You also need to be directly providing the restricted services to be disqualified from SEIS/EIS. So, for example, you could still qualify for SEIS/EIS if you’re building a SaaS technology platform for financial services companies, so long as you don’t directly handle money or bear any financial risk.

Find out if you’re a Knowledge Intensive Company (KIC)

Applying for EIS Advance Assurance? If you qualify as a Knowledge Intensive Company (KIC), you can raise more, with greater flexibility, under EIS.

You could be a KIC if you:

  • incur significant research, development or innovation expenses
  • are developing intellectual property that’s going to be your main business in the future
  • have over 20% of your 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 more. As a KIC, you can raise up to £10 million through EIS per year (instead of £5 million) and a total of £20 million through EIS throughout the company’s lifetime (instead of £12 million).
  • Extended trading window. You’ll still qualify for EIS funding for 10 years from the start of trade (instead of seven years).
  • A bigger team. You’ll qualify with up to 500 full-time employees (instead of 250)

If you don’t need those extra EIS benefits straightaway, you don’t need to worry about proving your KIC status immediately. You can apply for KIC status later when you need it.

2. Make sure you have your company’s Unique Taxpayer Reference (UTR) number

You’ll need your company’s 10-digit Unique Taxpayer Reference (UTR) number to apply for SEIS/EIS Advance Assurance.

You should have automatically been sent your UTR when you registered with Companies House. If you can’t find it, you can request it online. This process can take about a week so it’s good to find this number before you start your Advance Assurance application.

3. Create your business plan (or pitch deck) and financial forecast

For your SEIS/EIS Advance Assurance application, you need to include a 3-year business plan and financial forecast at the same level of detail that you would ordinarily provide to investors – like your pitch deck.

The materials you’ve created for investors are a great starting point. But there’s an important difference between your investor-facing business plan and your HMRC-facing business plan. To qualify for SEIS/EIS, you have to show how your startup meets the risk to capital condition.

What is the risk to capital condition?
To be eligible for SEIS/EIS tax relief, there are two principles the investment must meet:
- the company in which the investment is made must have objectives to grow and develop over the long term
- the investment must carry a significant risk that the investor will lose more capital than they gain as a return (including any tax relief).

The clearest way to make sure you’re ticking HMRC’s risk to capital box is to include a brief SWOT analysis and focus on the weaknesses of and threats to your business. It’s a good idea to explain how these factors contribute to the risk of the investment and/or show the company’s objective to develop and grow.

Zlatina Trifonova

It’s important to remember that HMRC do not want to see the same things as your investors. Actually, it’s pretty much the exact opposite! HMRC wants to see the risks to your business and its likelihood to fail (as a new company), and not your potential grand success.

When you apply for AA through SeedLegals, we’ll check your business plan or pitch deck in detail (like we do all your supporting documents) so you can be confident you’re covering everything you need to.

Zlatina Trifonova

SEIS/EIS Specialist,

SeedLegals

4. Confirm you have at least one investor on board

If you haven’t raised funds under one of HMRC’s venture capital schemes before, you need to include the name and details of at least one investor who is – in theory – committed to invest 25% or more of your raise.

This is a bit of a chicken and egg situation, because you need to know who your investors are to obtain Advance Assurance. But investors will often only commit to investing after you have obtained your Advance Assurance…

The good news is that the investor names and amounts aren’t locked in at this stage, and you can change them at any time. But don’t make something up or give someone’s name without their consent. Find investors who are, on balance, likely to invest – even if they’re only a soft commitment at this stage.

There are also rules for SEIS/EIS investors. Read our guides for SEIS investors
and EIS investors to find out what criteria they need to meet and what benefits they get.

5. Find out if you received any de minimis aid

If you’ve received any de minimis state aid in the past three years, this counts towards the SEIS investment cap of £250,000.

De minimis aid usually comes from government or university grants.

Whether or not the aid you received counts as de minimis is judged on a case by case basis. The body awarding the aid or grant usually makes it clear at the time of issuance if it’s classed as de minimis aid. So, double-check the comms that came with the money or check with the body that awarded you the grant, and if it’s de minimis, simply add the details to your application.

Check you’re ready to apply

Our handy SEIS/EIS AA checklist helps you make sure you’re ticking off everything you need for a speedy approval.

Download checklist
Checklist New 02

6. Gather all the documentation

In your Advance Assurance application, you’ll need to demonstrate that you fulfil the SEIS/EIS criteria. You’ll need to provide:

  • the date your company started trading
  • details of any SEIS or EIS investments you’ve taken previously
  • your response to the risk to capital condition (a brief SWOT analysis in the pitch deck is usually enough)
  • name, address and intended amount of investment of at least one potential investor (if you haven’t previously received investment under a Venture Capital Scheme)

 

How do I find out the date I started trading?

To define trading, HMRC uses 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 counts as trading.

The date you started trading will often be the date you first received revenue, 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 elsewhere in the attached documents, this won’t cause any issues.

You’ll also need these supporting documents:

  • latest company bank statements or accounts filed with Companies House (if you have those)
  • current company Articles of Association (there’s no need to send the Model Articles if you’re using them)
  • pitch deck – this can be the same as the deck you show potential investors, so long as you’re satisfying the risk to capital condition in your SEIS/EIS application.
  • 3-year profit and loss projections (can be included within the pitch deck)
  • documents confirming any de minimis aid grants
  • your company share register (if you’ve set up your cap table on SeedLegals, this will be included in the document pack automatically)

When you apply through SeedLegals, our experts carefully review all your documents to verify you have everything you need to successfully obtain your Advance Assurance.

Zlatina Trifonova

In your pitch deck, remember to be very clear about what your trade is and how exactly you generate revenue. Often founders get so wrapped up in their brilliant ideas that they assume HMRC have the industry knowledge to understand them – but this is not always the case. Clarity is key!

Zlatina Trifonova

SEIS/EIS Specialist,

SeedLegals

7. 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 after your documents are finalised, we’ll also submit on your behalf to HMRC.

Talk to the SEIS/EIS experts

Not sure where to start with your SEIS/EIS Advance Assurance application? Need help with your docs? Our SEIS/EIS team of experts is here to help. Book a call with a friendly member of the team to get your application on track.


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