HMRC taking a tougher line on advance assurance applications with incomplete information
On 10th May 2016, HMRC updated their (draft) EIS guidance in relation to changes introduced by Finance Act (No.2) 2015. This revised (draft) guidance states that all EIS advance assurance applications and EIS1 applications must contain:
- The latest accounts of the company and accounts of any subsidiary company
- The company’s business plan
- The latest draft of any prospectus or similar document to be issued to potential investors
- An up to date copy of the Memorandum and Articles of Association of the company and its subsidiaries with details of any changes to be made
- A copy of the register of members at the date of submission of the advance assurance application or at the date of the EIS1 compliance statement (whichever applies)
- Details of any subscription agreement or other side agreement to be entered into by the shareholders
- Any other relevant information, for example documents to support a company’s view that it is a knowledge-intensive company and group structure diagram.
Until now, it has generally been common practice across the industry (where appropriate) to submit applications that are missing one or two supporting documents (such as final Articles, or key commercial agreements) with a note to say that these will follow (generally in a matter of days/weeks before the application has reached the front of the queue), particularly where the covering letter refers to this and where key facts in the application won’t be superseded by the documents. This allowed businesses, who are often in need of urgent capital injection, to finalise key documents while the application was progressing in the queue at HMRC.
However, we have been informed by HMRC that where information is, in their opinion, missing from an advance assurance application or incomplete – even those submitted before they published their draft guidance – the application will be rejected and placed ‘on hold’ until the missing information is submitted – at which point it will join the back of the queue.
Whilst, on the whole, this is disappointing news which will no doubt impact on how quickly many companies can make their submissions, we hope that the overall effect is to shorten the queue of applications at HMRC.
An Inspector has indicated to us that it is hoped that where HMRC raise questions on an application, that they will deal with responses in a shorter time period.
Any clients with particular queries are urged to get in touch with their usual Philip Hare & Associates contact.
