HMRC has published a response on 'Tax-advantaged venture capital schemes – streamlining the advance assurance service'. Following its recent consultation on the advance assurance service for tax-advantaged venture capital schemes.

Where an entity seeks to raise finance under:

• Seed Enterprise Investment Scheme (SEIS)
• Enterprise Investment Scheme (EIS)
• Venture Capital Trusts (VCT)
• Social investment Tax Relief (SITR)

it can seek Advance Assurance from HMRC that it will qualify. Due to increased demand, these applications are taking longer to process so the Government seeks to streamline the service.

The consultation proposed five options:

1. Do nothing
2. Withdraw the advance assurance service.
3. Restrict access to the service, e.g.
   1. To companies seeking their first investment,
   2. By reference to the size of the investment or company,
   3. To companies seeking SEIS investment only.
4. Provide a service for discrete aspects of the rules or a company’s eligibility under a specific rule.
5. Using standard documents such as shareholder agreements for pre-approval.

Responses

The vast majority of respondents believed the advance assurance service should continue; it was noted that these are necessary due to the severe consequences of not qualifying. Views were mixed on if or how to restrict access.

A service providing assurance on discrete aspects was not considered capable of replacing the advance assurance service.

Standard documents were thought only of use to the smallest entities and fund managers who would make many applications each year.

Government response

The service will continue, with a number of steps to improve the service.

1. Digitisation
2. As a discretionary, non-statutory service, HMRC may decline to give an opinion
3. Where a company is relying on a particular interpretation, it should provide a full technical analysis of how it meets that law. HMRC will not opine where it believes the application is testing the limits, not seeking to allay genuine concerns
4. From 2 January 2018, HMRC will not opine on speculative applications. The company should have approached potential investors, and name the individual(s), fund manager(s) and other promoter(s) who are expected to invest.
5. From 4 December 2017, HMRC will not opine where it is reasonable to conclude that the investment is part of a capital preservation scheme

HMRC will also improve its guidance, including a checklist setting out the documents and information the company needs to provide, as well as a FAQ.

Links:

Consultation: Tax-advantaged venture capital schemes – streamlining the advance assurance service

EIS or SEIS: advanced assurance from HMRC

Seed Enterprise Investment Scheme 

Enterprise Investment Scheme

Social investment Tax Relief

HMRC: Tax-advantaged venture capital schemes – streamlining the advance assurance service

HMRC Manuals: Venture Capital Schemes: Risk-to-capital condition draft guidance: contents