HMRC SEIS and EIS checklists | Jonathan Lea Network

HMRC SEIS and EIS checklists

On 10 October 2019, HMRC introduced some rule changes relating to SEIS and EIS advance assurance applications. Below we have set out the main / significant changes that have come to our attention.

Introduction of SEIS and EIS checklists

The most noticeable change was the introduction of SEIS and EIS checklists. Such checklists must now be completed and submitted with any SEIS and / or EIS advance assurance application requests to the Venture Capital Reliefs Team.

Both checklists make clear that HMRC will not accept advance assurance applications for SEIS and / or EIS without a completed advance assurance application form and accompanying checklist(s).

Please follow this link for the SEIS / EIS advance assurance application form.

The SEIS advance assurance checklist is contained within HMRC’s guidance manual VCM60280 and the EIS checklist can be found under guidance manual VCM60180.

HMRC also provide a seemingly comprehensive list of the information required when submitting SEIS and EIS advance assurance applications. For the lists, please consult VCM60220 for SEIS and VCM60120 for EIS.

The checklists are both eight pages long and require you to insert responses to a series of questions regarding the SEIS / EIS qualifying criteria. The responses that can be provided are ‘Yes’, ‘Unsure’ or ‘Not applicable’. In the column next to your response to each point, you must provide relevant detail and highlight where such information can be found in the supporting documentation provided as part of the advance assurance application.

Such checklists appear to have been introduced to save HMRC from having to trawl through various documentation and determine for themselves whether or not a company in any given case meets the SEIS and / or EIS qualifying criteria.

It is hoped that the introduction of such checklists will help HMRC reduce their current response times and process advance assurance applications in a more efficient manner.

For HMRC’s most up-to-date guidance on the SEIS regime, please consult VCM60200. For their most up-to-date guidance on the EIS regime, please consult VCM60100.

Useful further information on SEIS and EIS advance assurance applications

In HMRC’s guidance manuals VCM60270 and VCM60170, they provide some useful further information in relation to advance assurance applications.

Earlier this year, HMRC increased their response times from 30 working days to 45 working days. The head HMRC inspector in the Venture Capital Reliefs Team informed us that the increase was “…a consequence of the popularity of the schemes and the small team I have to deal with the work”. He further assured us that HMRC was working hard to try and remedy the long wait times and informed us that they were in the process of recruiting additional staff to support the work.

HMRC state in VCM60270 and VCM60170 that they will aim to respond to most applications within 15 working days. However, complex cases take longer to consider and HMRC aims to respond to such applications within 40 working days. The guidance manuals further state that a response may take the form of an advance assurance, a rejection or a request for more information.

HMRC make clear throughout their guidance manuals that the advance assurance service is a non-statutory, discretionary service and as such, in cases where advance assurance is refused, there is no right of appeal.

In their guidance manuals VCM60270 and VCM60170, HMRC state that once they have provided an opinion they will engage in no more than two rounds of correspondence about the circumstances of the investment. They also state that they will not engage in further correspondence where an advance assurance has been issued. They advise that companies must submit a new application if the details of a prospective investment, or any information about the authorised advance assurance, changes.

In support of the above, HMRC’s guidance manual VCM60050 states as follows:

“The advance assurance service is a non-statutory, discretionary, service and there is no right of appeal against the VCR Team’s decision. The purpose of the service is not simply to agree every application but for HMRC to provide its opinion on whether a proposed investment would be eligible under the specified scheme. HMRC will provide an advance assurance only if it considers the proposed investment will meet the specified scheme rules, and the company and investors abide by the undertakings given in the application.

The VCR Team will not enter into protracted correspondence if it considers that an investment would not be eligible or refuses to provide an opinion because it is unable to reach a decision. The VCR Team will look at new information supplied but in general the VCR Team will enter into no more than two rounds of correspondence once it has made a decision”.

HMRC also confirms in VCM60050 that the VCR Team monitors companies to ensure that the company continues to meet the requirements of the particular scheme for the entire duration of the qualifying period. If a company does not meet all of the requirements during a qualifying period then the tax relief can be withdrawn.

Despite the above, we advised on an application earlier this year in relation to which HMRC initially declined to give an advance assurance approval. We contested their decision by sending a detailed response letter to the Venture Capital Reliefs Team, setting out our reasoning as to why we disagreed with their decision. We requested that the application be reviewed again by a HMRC inspector of highest seniority. In the end, HMRC approved the application, and so while they say that there is no right of appeal where an opinion is issued, we have evidence to show that their decisions can be overturned if you force the issue (though this of course may not be possible in every case of refusal).

New financial health requirement

Through viewing HMRC’s updated guidance manuals we came across a new requirement that companies applying for SEIS and / or EIS advance assurance must meet.

The ‘financial health requirement’ must now also be met by such companies. The requirement is detailed in VCM34060 for SEIS and VCM13040 for EIS. Please note that the guidance provided in those respective manuals is different and so if you are considering applying for both SEIS and EIS, you will need to consult the guidance in both manuals.

Generally, a company will not meet the financial health requirement if it is deemed to be ‘in difficulty’. The guidelines for SEIS state that a company will be determined to be ‘in difficulty’ if it is reasonable to assume that it would be regarded as “a firm in difficulty” for the purposes of the European Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C244/02).

The abovementioned EC guidelines are lengthy and there is no Community definition of what constitutes ‘a firm in difficulty. However, for the purposes of HMRC’s guidelines, the Commission regards a firm as being in difficulty where it is unable, whether through its own resources or with the funds it is able to obtain from its owner(s) / shareholders or creditors, to stem losses which, without outside intervention by the public authorities, will almost certainly condemn it to going out of business in the short or medium term. In VCM34060, HMRC provide examples of companies that will be regarded as being ‘in difficulty’ for the purposes of their guidelines.

Under HMRC’s EIS guidelines (VCM13040), it again states that a company must not be ‘in difficulty’ if it is to meet the financial health requirement. It provides that broadly, a company is in difficulty where, without receiving the tax-advantaged investment, it will almost certainly go out of business in the short or medium term.

HMRC’s guidance on the financial health requirement as far as it applies to EIS companies then states that HMRC will regard any company as being ‘in difficulty’ when it meets the criteria for insolvency under the Insolvency Act 1986, such as:

  • the company is unable to pay its debts as they fall due (often known as the ‘cash flow test’); and
  • the value of the company’s assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities (the “balance sheet test”).

The Insolvency Act 1986 also provides that a company will be unable to pay its debts if:

  • a creditor owed more than £750 has served a formal written demand on the company (i.e. a ‘statutory demand’), waited three weeks and has not been paid or come to an arrangement for payment with the company; and
  • a creditor has obtained judgement against the company and attempted to execute the judgement (by sending court officials to recover assets or cash from the company), and the debt is still unsatisfied in full or in part.

HMRC’s guidance for EIS companies also provides that where more than seven years have passed since the company’s first commercial sale, a company will also be regarded as being ‘in difficulty’ if more than half of its subscribed share capital, including the share premium account, has disappeared as a result of accumulated losses.

We currently charge a minimum fixed fee of £1,000 plus VAT to advise on, produce and submit SEIS and EIS advance assurance applications (the same minimum £1,000 plus VAT fee applies doe dual SEIS and EIS applications, so best to apply for both SEIS and EIS advance assurance at the outset), unless there are particular complications that need to be addressed, in which case our fees will increase accordingly.

If you would like our assistance with an SEIS / EIS advance assurance application, please first send an email to with an introduction and an overview of the issues you’d lie to discuss, following which someone will liaise to fix a mutually convenient time for a no cost, no obligation initial call with one of our fee earners.

This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited 2023. 

About Jonathan Lea

Jonathan is a specialist business law solicitor who has been practising for over 18 years, starting at the top international City firms before then spending some time at a couple of smaller practices. In 2013 he started working on a self-employed basis as a consultant solicitor, while in 2019 The Jonathan Lea Network became a SRA regulated law firm itself after Jonathan got tired of spending all day referring clients and work to other law firms.

The Jonathan Lea Network is now a full service firm of solicitors that employs senior and junior solicitors, trainee solicitors, paralegals and administration staff who all work from a modern open plan office in Haywards Heath. This close-knit retained team is enhanced by a trusted network of specialist consultant solicitors who work remotely and, where relevant, combine seamlessly with the central team.

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