Don't invest unless you're prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong.
Take 2 mins to learn more
Risk Summary

Estimated reading time: 2 min

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

  • You could lose all the money you invest
  • Most investments are shares in start-up businesses or bonds issued by them. Investors in these shares or bonds often lose 100% of the money they invested, as most start-up businesses fail.
  • Checks on the businesses you are investing in, such as how well they are expected to perform, may not have been carried out by the platform you are investing through. You should do your own research before investing.

You won't get your money back quickly

  • Even if the business you invest in is successful, it will likely take several years to get your money back.
  • The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
  • Start-up businesses very rarely pay you back through dividends. You should not expect to get your money back this way.
  • Some platforms may give you the opportunity to sell your investment early through a 'secondary market' or 'bulletin board', but there is no guarantee you will find a buyer at the price you are willing to sell.

Don't put all your eggs in one basket

  • Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well. A good rule of thumb is not to invest more than 10% of your money in high-risk investments. Learn more here.

The value of your investment can be reduced

  • If your investment is shares, the percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
  • These new shares could have additional rights that your shares don't have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

You are unlikely to be protected if something goes wrong

  • Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker.
  • Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated platform, FOS may be able to consider it. Learn more about FOS protection here.

If you are interested in learning more about how to protect yourself, visit the FCA's website here.

For further information about investment-based crowdfunding, visit the crowdfunding section of the FCA's website here.
Insights
Matthew Robineau
· 4 min read
· Updated on

SEIS and EIS Advance Assurance Explained

SEIS and EIS Advance Assurance Explained
7:00

EIS (Enterprise Investment Scheme) and SEIS (Seed Enterprise Investment Scheme) advance assurances are tools that make startups more appealing to investors.

These schemes offer tax relief to UK investors, making it easier for them to invest in early-stage companies. Without these tax reliefs, investing in startups can be riskier, as investors are typically drawn in by tax incentives like income tax relief (30% for EIS and 50% for SEIS) and capital gains tax relief. One key benefit is the SEIS and EIS loss relief, which can reduce the potential loss to just 38.5% in the event the investment does turn out as planned, rather than losing the entire investment.

These advantages make securing SEIS and EIS advance assurance fairly important for startups—especially those leveraging cutting-edge technology and fostering innovation—to attract robust financial backing for sustainable growth. 

In this guide, we'll go over SEIS & EIS advance assurance for both investors as well as startups looking to receive investment:

EIS/SEIS Advance Assurance FAQ

 

EIS advance assurance: for investors

EIS advance assurance is granted by HMRC for the company you’re investing in. When a company secures advance assurance, it receives a letter from HMRC stating that, based on the information provided, it appears to qualify for the EIS scheme. However, this is not a guarantee that individual investments will qualify for tax relief, although in the majority of cases, it does.

Once shares are issued, the company must submit a compliance statement (EIS1 form) to HMRC for approval. If approved, investors will receive an EIS3 certificate, which they can use to claim EIS tax relief. This process ensures that the investment meets HMRC’s criteria at the time of investment, but investors should be aware that any changes in the company’s circumstances could affect eligibility.

If the company has already received advance assurance for previous funding rounds, it’s unlikely they’ll need to apply again. It’s assumed that the company will remain eligible as long as it meets the EIS eligibility criteria. Your share provider should reassure you about this.

Access: Free Guide to the Enterprise Investment Scheme

 

SEIS advance assurance: for investors

SEIS advance assurance works similarly to EIS but is typically more important, as SEIS applies to early-stage, higher-risk companies. While the tax reliefs differ slightly, they are generally more generous than those under EIS. For example, SEIS offers 50% income tax relief compared to EIS’s 30%.

This SEIS is an attractive option not only because of the tax breaks but also due to its ability to support startups that are experimenting with innovative technologies, often attracting financial backing from investors involved in multiple venture capital schemes. 

Access: Free Guide to the Seed Enterprise Investment Scheme

 

For Startups: How to Secure EIS and SEIS Advance Assurance

To apply for EIS advance assurance, businesses must use the GOV.UK website or work with third-party organisations that support applications. At this stage, including a detailed compliance statement is crucial to demonstrate adherence to all regulatory requirements demanded by HMRC.

It's worth noting that the process for SEIS advance assurance is usually faster, as the EIS application that typically involves a more detailed review and another compliance statement may be required.

 

What Documents and Information Are Required?

  • Company trading start date: You need to determine when your company began trading. Trading is generally defined as "undertaking activities with a view to a profit." HMRC uses the analogy that if you have products on a shelf and you can turn the sign to "open," you are trading.
  • Previous SEIS investments: Provide details of any prior SEIS investment rounds.
  • Potential investor details: This eliminates non-serious applications. While the listed investor isn’t obligated to invest, they must be a genuine potential investor.
  • Risk to Capital condition: Your company must demonstrate objectives to grow and develop long-term, with a significant risk that investors stand to lose more than they gain.
  • Bank statements: If applicable, submit recent copies of bank statements or accounts filed with Companies House.
  • Articles of association: Submit the latest articles of association. If you’re using the Model Articles, these don’t need to be submitted.
  • Pitch deck: Provide the deck used to present to potential investors, showing necessary information to meet the risk to capital condition.
  • Financial models: Include balance sheets and a profit/loss forecast for the next three years, explaining why the investment is required and how it will be used.
  • Grants received: If you’ve received any government or university grants, submit details. Ensure you check if the grants are "de minimis" before applying.

 

EIS/SEIS Advance Assurance FAQ

For Investors

1. Does having EIS or SEIS advance assurance guarantee that I will receive tax relief?

No, advance assurance only confirms that HMRC considers the company eligible for the scheme at the time of application. However, the company must still follow all EIS/SEIS rules, and HMRC will review each investor’s claim individually when they submit their tax return.

2. Can I invest in a company that doesn’t have EIS/SEIS advance assurance?

Yes, but without advance assurance, there’s no guarantee that the investment will qualify for EIS/SEIS tax relief. Some investors prefer to wait until a company secures advance assurance before committing funds. However, if the company has already previously had advance assurance then if the current round is labelled as EIS or SEIS, there should be no issues.

3. How do I check if a company has EIS/SEIS advance assurance?

You can ask the company for confirmation, as they will receive a letter from HMRC upon approval. If investing through a fund or platform, you may ask them for this information also.New call-to-action

For Startup Owners Seeking Investment

1. How long does it take for HMRC to approve advance assurance?

Approval times vary, but applications typically take between 15 and 45 working days. If your application is incomplete or requires further details, the process may take longer. It’s always recommended to liaise directly with HMRC to check the status and ensure that all compliance statement requirements have been met.

2. How early should I apply?

It’s recommended to apply at least two months before reaching out to investors, giving HMRC sufficient time to process your application.

3. Does SEIS/EIS advance assurance expire?

While advance assurance itself doesn’t expire, your company must meet specific criteria to remain eligible. For SEIS, the company must have been trading for less than three years. For EIS, this period extends to seven years. However, if you qualify as a knowledge-intensive company, your first commercial sale must have occurred within the last ten years.
Driving Growth.
Creating Value.
Delivering Impact.

Backed by

Growth Capital Ventures (GCV) is backed by funds managed by Maven Capital Partners, one of the UK’s leading private equity and alternative asset managers.