SEIS / EIS Advance Assurance

We are not a simply platform, we are a full-service law firm able to facilitate your application and assist you at every stage of the SEIS and EIS process.

We advise on and prepare a detailed cover letter to show to HMRC how the Company meets all the necessary criteria, such as the risk to capital condition and the financial health requirement.

As part of our remit, we will also review all documents that you supply to us (e.g. your business plan / pitch deck) to ensure that there is nothing within those documents that could potentially cause issues from HMRC’s perspective. In addition, we will complete the advance assurance application form and the recently introduced SEIS and EIS checklists.

The majority of the SEIS and EIS work is done by our trainee solicitors, who have extensive experience in this field. Where complex issues arise, senior solicitors with a vast range of corporate, commercial and tax experience will be consulted and tasked with reviewing the documentation where necessary.

This structure ensures that the work conducted in respect of SEIS and EIS applications is done so to the highest quality, utilising senior fee earners where necessary but also allowing us to keep our fees down by using junior fee earners, such as trainee solicitors.

You can find more information about our team here.

Naturally the time frames will vary depending on whether the necessary information is provided to us and done so in a timely manner. It usually takes us between one week to 10 days depending on the complexity of the application.

HMRC advises that they aim to respond 95% of correspondence within 40 working days of receipt of the application. We have however, built up a good working relationship with HMRC and have seen some applications approved within a few days of submission. The more complex the application, the more likely the time frame for response will increase.

The time cap is a cost-efficient way of charging, which allows us to split the work between junior and senior fee earners, without the total fee being disproportionately affected.

For example, a fixed fee of £500 plus VAT subject to a 4-hour time cap might operate like as follows: the junior fee earner, whose hourly rate is £160 plus VAT, may do three hours of billable work whilst the senior fee earner, whose hourly rate is £355 plus VAT, is limited to an hour of billable work. On the traditional time-incurred model the total fees accrued would be 3 hours x £160 plus VAT= £480 plus VAT, £480 + £355 (1 hour of a senior’s time) = £835 plus VAT, whereas on the capped fixed fee model this would still be £500 plus VAT.

Our vast experience with SEIS and EIS work means that we can be accurate when determining the fee and time cap. However, there are rare occasions where we may exceed the time cap, for example where many new points and queries are raised by you or there are additional complexities that we have not anticipated at the outset. In the unlikely event, that it looks like we may exceed the cap, we will always notify you when it is likely to reach the time-cap and then obtain your consent to exceed such time-cap before proceeding with the remaining work on a time-incurred basis in accordance with our hourly rates.

Most of the time we are able to predict when HMRC might respond with further questions to an SEIS and EIS application and if we do envision this occurring, we will highlight to you the areas that HMRC may raise questions about.

The first thing to remember when HMRC respond with further questions to an advance assurance application or compliance statement application, is that this is not a rejected application. Where HMRC ask further questions, it is usually to clarify points that they are unsure of and more often than not, after a round or two of questions and retorts we are able to successfully push through the application. However, please note that this usually causes delays in the process and it is recommended to discuss this with your investors so that you manage their expectations in respect to the timeline.

You can notify your investor(s) that you have received the relevant SEIS and / or EIS approvals in respect of their investments and that your company is ready to receive investment.

In order for your potential investor(s) to claim their SEIS / EIS tax reliefs, you must first raise the funds from the investor(s) by receiving the monies in your bank account and then issuing the shares to those investors. Please note that is a disqualifying event to issue shares before receiving the investment monies. Please refer to our blog article on Common SEIS and EIS Mistakes.

We often assist our clients with the legal areas involved in raising equity finance. Our work usually includes the following:

1. advising on and producing a subscription agreement (also known as an investment agreement, although sometimes an investment agreement can be a subscription agreement combined with a shareholders’ agreement, however, we recommend they are kept separate) setting out and recording the details and terms of the investment in the company and ensuring the parties understand the formalities and process that must be followed in order to complete the investment;
2. advising on and producing a new constitution in the form of a shareholder’s agreement and/or new articles of association to govern the relationship between the shareholders and the company on an ongoing basis;
3. producing the ancillary documents such as board minutes and the necessary shareholder resolutions in order to allot the new shares to the investors and to generally record the investment round having taken place; and
4. filing at Companies House the forms required to allot the new shares to investors.

Following the completion of an investment round and provided that the company has either been trading for at least 4 months or has spent at least 70% of the monies raised by the relevant issue of shares, we assist the company in submitting to HMRC the SEIS 1 / EIS 1 compliance statement, following which HMRC will give the company authority to issue SEIS 3 / EIS 3 certificates to its investors. This is achieved by HMRC providing an authorisation number which will authorise the company to issue SEIS 3 / EIS 3 compliance certificates, which the investor(s) can in turn complete and submit to HMRC to claim their SEIS / EIS tax reliefs.

The Venture Capitalist Manuals (the official HMRC guidance in respect of SEIS and EIS) can be complicated to navigate and comprehend.

It is important that there are no smoking guns left in an application, that would give HMRC a reason to refuse an application on a technicality.

Also, please note that there is no formal appeals process for when an application is rejected. This means if an application is rejected, you could be left in a very sticky situation, especially if your investors have invested or are investing on the presumption that they would be receiving SEIS and EIS relief.