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HMRC have updated their guidance to companies applying for Advance Assurance that the company seeking finance qualifies for one of the generous venture capital tax reliefs that are currently available.
Individual investors may obtain an income tax deduction of 50% if the company qualifies for Seed Enterprise Investment Scheme (SEIS) or 30% income tax relief where the company qualifies for EIS relief. In addition there is potentially a CGT exemption when the shares are sold and also deferral or relief from CGT on other disposals. Although not mandatory, Advance Assurance that the company and trade qualifies for tax relief may encourage more external investors to invest in the company.
There are numerous detailed conditions that need to be satisfied for the company to qualify and lots of details such as business plans need to be supplied to obtain Advance Assurance. HMRC will not comment on whether a particular investor would qualify for relief, however the company will normally be required to give details of potential investors for HMRC to consider the application. Note that the generous tax reliefs are not normally available to an investor who is connected to the company, typically an existing employee or someone who will own more than 30% of the company’s capital.
The HMRC guidance also covers Advance Assurance that the company qualifies under the Social Investment Tax Relief and Venture Capital Trust rules.
Applications for Advance Assurance may be emailed to: firstname.lastname@example.org.
Or alternatively posted to the HMRC Venture Capital Reliefs Team.
For updated guidance see: Apply for advance assurance on a venture capital scheme - GOV.UK (www.gov.uk)
06 Feb 2024
Government borrowing fell to £7.8 billion in December 2023 giving Chancellor Jeremy Hunt more scope to make the tax cuts he has hinted at in the Spring Budget.
Tax cut promises may need to be scrapped as a result of the UK being in an 'unfortunate economic and fiscal bind', the Institute for Fiscal Studies (IFS) has warned.
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