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Give your EIS an AAA rating

Don’t get caught out and sent to the back of the queue when making an Advance Assurance Application for an Enterprise Investment Scheme, says RSM’s Emma Milgate.

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Emma Milgate

June 2018

Many of you would have heard of the Enterprise Investment Scheme (EIS) and I wanted to take a moment to share some of my practical experience of the Advance Assurance Application (AAA) process. If you have not, then in a nutshell EIS is a tax incentive for investors who provide new share capital for small start-up or newer trading companies.

The EIS is a complex technical area and if you would like to delve into the technical aspects then HMRC regularly updates its manuals, which can be found here.

The AAA process is not mandatory but gives comfort in advance to directors and investors that the company raising share capital qualifies under the EIS.

Naming the Investor or Investment Adviser

Since January 2018, HMRC has been filtering out speculative applications by requesting that the investors (individuals or groups) or investment adviser are named in the AAA. If you make a genuine AAA but have not told HMRC who the investor is, it will return the application unanswered. HMRC does not read beyond the first page of an application to see if the investor is named, therefore this must be stated in the first few paragraphs to avoid the application being returned.

How long does it take?

In the Autumn Statement it was announced that straightforward applications would be answered within 15 days. I have had varying HMRC response times, including a pre-Christmas submission taking 12 weeks, and a recent straightforward submission taking 12 days. It appears that we are moving toward a 15-day turnaround, but where the AAA is more complex, eg, if the company is a Knowledge Intensive Company or you are applying for EIS and Venture Capital Trust Scheme assurance together, then the response does take longer due to the technical reviews required. In complex cases a 6 to 8-week wait would be more realistic and should be factored into any timelines.

Complete applications

HMRC reviews AAAs in a conveyor belt system.  If your application is incomplete, then HMRC will only put it in the queue once complete information is received. Therefore, only send AAAs once complete!

The above is by no means exhaustive and I am sure you have your own practical AAA experiences. Let us know.

Emma Milgate is an associate director at RSM

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