26th Feb 2018

Is advance assurance for SEIS totally pointless?

Despite SEIS popularity amongst start-up UK tech businesses and angel investors, the underlying complexities are often played down as being ‘just another cost a startup can’t afford’.

“Can’t we just DIY that?”

I got asked the other day. Of course, but you run the risk that very discrete but very important tax implications are forgotten about though.

At Blu Sky we care a lot about SEIS, as it is very, very complex! Just today a raging debate erupted around deferred shares in the office! That’s how we roll at Blu Sky. (And expect a blog from Sam Wood on that very soon.)

Within this blog I want to address the question:

“Should I consider Advance Assurance for SEIS?”

Well, even before the changes HMRC introduced on January 2nd this year, my answer generally has been “it’s a time-wasting step that really you can just avoid doing as it’s pointless”, despite investors still insisting on it!

What made me say that? Well simply because the fabric, make up & terms of the final subscription agreement plus your business plan, cap table and business model bear little or no resemblance to the documentation HMRC passed an opinion on 8-10 weeks earlier.

So, what’s the point? Does your investor really get any assurance their SEIS3 form will ever arrive once the round closes? Not really, and surely seasoned Angels are not investing purely to save tax, they are doing so because they see an opportunity they want to get behind, and getting a tax credit is an added bonus.

And now, there’s been a change that every Advance Assurance application must include the names of investors intending to invest in that funding round, or the application will be rejected as ‘speculative’.

This means you need to have most of your investors lined up just to progress the approval process and that means you need commitment from your investors first.

I think this is called chicken and egg.

So what is the alternative?

Simple, you can opt to get an accountant (preferably one who processes 200+ SEIS applications a year like Blu Sky) to prepare and review your SEIS application for you. Doing this alongside your raise will provide assurance that based on a standard subscription agreement and other key rules being met the SEIS application should pass HMRC without any egg shells cracking…