Navigating Advance Assurance Process and Compliance 

Published by Mohsin Khan posted in EIS, Tax Services on December 30, 2024

The Advance Assurance Process offers substantial EIS qualifying trade benefits to investors, making it an attractive option for raising capital. To ensure eligibility and compliance, companies must follow a structured process. Here’s a detailed overview of the advance assurance process and compliance requirements.

Advance Assurance Process

Purpose:

The advance assurance provides a provisional indication from HMRC that the company’s shares are likely to qualify for EIS qualifying trade. Consequently, this boosts investor confidence by confirming that the investment is expected to meet the criteria for EIS compliance support.

Documentation Required

  • Detailed Business Plan and Financial Forecasts:

This should include projections and a comprehensive overview of the company’s strategy and financial health. Additionally, it helps demonstrate the company’s future potential.

  • Latest Accounts:

Provide the most recent financial statements, if available, to show the company’s current financial position.

  • Description of Trading Activities:

Outline how the company will utilise the funds and describe its business operations. This helps illustrate the purpose and expected impact of the investment.

  • List of Previous Venture Capital Investments:

Detail past investments to show historical funding and support, which provides context for the company’s financial history.

  • Company’s Memorandum and Articles of Association:

These documents outline the company’s governance structure and operational framework, which are essential for understanding its legal foundation.

  • Register of Members:

Include the list of shareholders as of the date of the application, offering insight into the company’s ownership structure.

  • Draft Documents:

Prepare explanations of the investment proposal for potential investors, providing them with a clear understanding of the investment opportunity.

Submission:

Submit all required documents to HMRC for review. This step is crucial for obtaining advance assurance.

Outcome:

If HMRC is satisfied, they will issue a statement indicating that the investment is likely to qualify for EIS qualifying trade. This assurance, therefore, makes the investment more attractive to potential investors.

Example:

Tech Start-Up Ltd aims to raise £1 million. They submit their business plan, financial forecasts, and other necessary documents to HMRC. Following the review, they receive advance assurance, which enhances the investment’s appeal to potential investors.

Compliance Requirements Post-Issue

Trading Requirement:

The company must commence trading within two years of the investment to comply with EIS-qualifying trade regulations. This requirement ensures that the company is actively pursuing its business objectives.

Use of Funds:

Capital raised must be used for company growth and development, rather than acquiring other businesses. Proper allocation of funds is essential for maintaining investment compliance.

Qualifying Trade:

The company must engage in a qualifying trade. Certain activities, such as financial services, property development, and legal services, are excluded from EIS compliance support.

Three-Year Rule:

The company must meet all EIS conditions for at least three years after the share issue to remain compliant with EIS qualifying trade. This long-term requirement supports sustained business development and investment.

Example:

After securing £500,000 from investors, Green Energy Ltd uses the funds for research and development. They ensure compliance with EIS qualifying trade conditions for three years, thereby retaining their investment compliance.

Practical Advice from Apex Accountants

Apex Accountants provide expert guidance throughout the Advance Assurance Process:

  • Securing Advance Assurance:
    We assist in preparing and submitting the necessary documents to HMRC. This process ensures you get advance assurance for your investment compliance.
  • Ongoing Compliance:
    We ensure continuous adherence to EIS requirements post-investment, which helps maintain eligibility for EIS compliance support.
  • Documentation Support:
    We assist in preparing business plans, compliance statements, and other required documents.

Worked Example:

CleanTech Innovations plans to raise £800,000. Apex Accountants guide them through obtaining advance assurance and ensuring compliance with EIS regulations. As a result, CleanTech Innovations successfully secures the investment and issues EIS3 certificates, enabling investors to claim their EIS qualifying trade benefits.

Leverage the Advance Assurance Process for your business growth. Partner with Apex Accountants for expert guidance on securing advance assurance and maintaining compliance. Maximise your EIS compliance support and streamline Advance Assurance Process investments with our comprehensive support. Contact Our Experts Today!

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