HMRC Wants To Tweak SEIS Assurances For Investors

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Investors and their financial advisers are seeking more help from the government to reassure them about companies looking for funding from tax incentivised schemes.

A recent consultation has revealed huge numbers of investors and investment professionals rely on the HM Revenue and Customs (HMRC) advance assurance service for Seed Enterprise Investment Scheme (SEIS) and other investments with tax incentives.

However, the government has disclosed only 50% of companies going through the advance assurance service go on to raise funds and a proportion raise funds but breaks the terms of the assurance, which means investors lose tax relief claims.

“We want to continue to look at the scope for reducing unnecessary demand,” said the consultation response.

New focus to streamline applications

“Before we can consider making any changes to the service it is clear from the responses that we need to carry out more work to provide more reassurance to companies and advisers. This has the potential to reduce the demands on the service and so improve response times for all applicants.

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“We intend to use the information we have received to plan further work, including informal consultations with respondents who have said they are willing to help.”

The consultation was started in December 2016 and prompted 60 responses from trade bodies, investment professionals and individuals.

From the responses, HMRC expects to focus on:

  • Improving our communications and guidance, including checklists to make advance assurance applications easier
  • Looking at standard documents for the smallest companies and fund managers.

How SEIS works

The consultation covered SEIS, the Enterprise investment Scheme (EIS), Venture Capital Trusts (VCT) and Social Investment Tax Relief (SITR).

HMRC accepts 70% of advance assurance applications without query, and a further 20% are passed once additional information is supplied. The information is typically requested because the application.

The consultation asked if investors wanted to keep the advance assurance service as many companies either failed the process or did not go on to raise investments.

SEIS offers investors a 50% income tax reduction up to a maximum £50,000 for taking a £100,000 stake in a new-start company. Investors also benefit from capital gains tax reliefs on selling shares and loss relief should the investment fail.

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