SEIS/EIS Advance Assurance: Why It Matters Before Raising Funds

How Advance Assurance Fits into UK Fundraising

Raising capital in the UK involves more than perfecting a pitch. To unlock generous tax reliefs under the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS), many investors demand evidence that your company will qualify. The mechanism for delivering that evidence is the SEIS/EIS advance assurance letter issued by HM Revenue & Customs (HMRC). Advance assurance is HMRC’s provisional endorsement that your proposed share issue is likely to qualify for SEIS or EIS, allowing you to show investors that they can claim tax relief. Although obtaining advance assurance is not legally required to raise funds, most seasoned angel investors and early‑stage venture capital (VC) firms will insist on seeing it before committing.

This article dissects why advance assurance matters, how the HMRC approval process works, and what documentation founders must prepare. Along the way, you’ll find insider tips for avoiding rejection and building investor confidence. To illustrate the process, we’ve included an infographic and comparison charts. We also highlight how Undo Capital, an all‑in‑one fundraising platform, streamlines the SEIS/EIS approval process with smart forms, AI validation and automated documentation. Whether you’re a founder, chief financial officer, angel investor or early‑stage VC, this deep dive will show why advance assurance should be on your pre‑funding checklist and how to navigate it like a pro.

What Is SEIS/EIS Advance Assurance?

SEIS vs EIS: Two Tax Relief Schemes

The UK government created SEIS and EIS to encourage investment in young, innovative companies. Both schemes offer investors attractive income and capital gains tax reliefs when they purchase new shares in qualifying businesses. SEIS is designed for early-stage startups that have been trading for under three years, employ fewer than 25 people, and hold gross assets of no more than £350,000 (at the time of share issue). It lets investors claim 50% income tax relief on investments of up to £200,000 per tax year and allows companies to raise up to £250,000.

EIS, on the other hand, targets more mature companies with up to seven years of trading history, fewer than 250 employees, and gross assets under £15 million. It provides 30% income tax relief on investments of up to £1 million per investor, enabling businesses to raise as much as £12 million through the scheme. Knowledge-intensive companies (KICs), such as those in deep-tech or biotech, may qualify for higher funding limits under EIS.

What Is Advance Assurance?

Advance assurance is HMRC’s optional pre‑clearance service that allows a company to check whether a proposed share issue is likely to qualify for SEIS or EIS. HMRC examines your company’s structure, trade and investment proposal and issues a letter of assurance if everything appears to meet the scheme rules. The letter can be shown to prospective investors, giving them provisional eligibility confirmation that they should be able to claim tax relief. Advance assurance does not guarantee that the final investment will qualify; after shares are issued, the company must still submit a compliance statement (SEIS1 or EIS1), and investors must meet their own conditions.

How HMRC Advance Assurance Works

1. Submission through HMRC’s online form. HMRC now requires all applications to be submitted via an online portal. You must provide a business plan, financial forecasts, a copy of the memorandum and articles of association, the company’s register of members and draft investment documents.
2. Review by the Venture Capital Reliefs Team. HMRC assesses whether your proposal satisfies SEIS/EIS rules. This includes verifying that the company carries on a qualifying trade, meets age and asset limits, and intends to use funds for growth. HMRC also applies the risk‑to‑capital condition: the company must have long‑term growth objectives, and the investment must expose investors to significant risk.

Advance assurance letter. If satisfied, HMRC issues a letter stating that, based on the information provided, the investment would likely qualify for tax relief. The letter is provisional; it does not cover individual investor eligibility and can be revoked if facts change.

What the Advance Assurance Letter Confirms

The advance assurance letter is often misunderstood. It confirms that, at the time of application, HMRC believes the company is a qualifying company for SEIS/EIS purposes and that the proposed share issue appears to qualify. It does not:

• Guarantee that each investor qualifies for tax relief (which depends on personal circumstances and shareholding rules).
• Provide a blanket approval for future share issues; each new round requires its own assurance.
• Protect against changes in legislation or incorrect information. HMRC reserves the right to withdraw assurance if the facts provided were incomplete or if the law changes.
  
  

For investors, however, the letter serves as early proof of compliance, allowing them to proceed with due diligence without fear of unexpected tax disqualification. For founders, it offers a chance to correct any eligibility issues before money changes hands.

Why Advance Assurance Matters Before Fundraising

Investor Confidence and Risk Mitigation

Investors rarely commit capital to early‑stage deals without some risk mitigation. A provisional HMRC approval signals that their investment is likely to be covered by the SEIS or EIS tax reliefs. An advance assurance letter builds investor confidence, differentiates your startup from competitors and prevents expensive surprises. Without the letter, investors may withhold funds or insert clauses that make funding conditional on receiving HMRC clearance, delaying your raise.

Advance assurance also helps investors satisfy their own risk‑management processes. Under the risk‑to‑capital condition, HMRC only approves companies intending to grow and develop and whose investors’ capital is genuinely at risk. By meeting this gateway test, a startup assures investors that it is not engaging in artificial tax planning.

Streamlining Due Diligence

When raising a pre‑seed or seed round, due diligence can stall if investors are unsure about your SEIS/EIS eligibility. HMRC’s guidance lists detailed documentation requirements: business plan, financial forecasts, memorandum and articles of association, register of members, draft investment documents and details of trading activities. Preparing these documents for advance assurance compels you to get your corporate house in order before investors scrutinise you. In return, investors can skip repetitive checks because HMRC has already reviewed the information.

Having advance assurance also shortens the due diligence timeline. Sprintlaw notes that including known investors in your application increases the likelihood of success and that HMRC’s application timeline typically ranges from 15 to 45 working days. An older guide from the Enterprise Investment Scheme Association (EISA) suggests HMRC aims for a 15‑day turnaround but may take 4–5 weeks, especially near the end of the tax year.

Avoiding Rejection Later

Submitting a compliance statement after shares are issued without first seeking advance assurance can be risky. If HMRC later decides that your share issue does not qualify, for example, due to non‑qualifying trades, an incorrect share structure or missing investor details, the tax reliefs will be denied and you may need to return investor funds. Sprintlaw identifies common pitfalls: incomplete or incorrect documents, listing no investors, operating in excluded sectors or mistiming your application. Because advance assurance is a non‑statutory service, there is no formal appeal mechanism if HMRC refuses. It is therefore prudent to discover and address eligibility issues before you raise capital. Getting pre‑approval also enables investors to claim reliefs promptly once the deal closes.

Typical Scenarios When Advance Assurance Is Essential

Pre‑Seed and Seed Rounds with Angel Investors

Early‑stage angel investors are particularly sensitive to tax relief eligibility. Many will ask for SEIS advance assurance or EIS advance assurance before issuing a term sheet. In pre‑seed rounds, investors expect startups to leverage SEIS, which only applies to companies trading for less than three years. Without a letter confirming that your share issue is likely to qualify, angels may either delay their investment until assurance is granted or demand large discounts in exchange for taking the risk.

Institutional Readiness for Early VC Investment

Seed and Series A VC funds also care about tax reliefs, particularly those with LPs seeking downside protection. In some cases, VC term sheets may include conditions requiring the company to obtain EIS advance assurance within a specified time. VC funds invest larger sums, so they typically use EIS rather than SEIS; EIS allows investments in companies trading up to seven years and raising up to £12 million. Advance assurance helps VCs demonstrate to their committees that your startup satisfies SEIS/EIS rules and that the investment is not part of a tax‑avoidance scheme.

Beyond early‑stage rounds, advance assurance is useful when a company plans to raise through crowdfunding platforms, apply to accelerators that demand SEIS/EIS eligibility or structure syndicated investments. In all these contexts, presenting SEIS/EIS advance assurance UK signals that the founders understand the rules and have done the necessary work.

The SEIS/EIS Advance Assurance Process

Before diving into the step‑by‑step process, review the following infographic illustrating the three key stages of an advanced assurance application:

Step 1:  Prepare Eligibility Documents

To start your SEIS/EIS approval process, gather all required information. HMRC specifies that applicants must submit:

• A detailed business plan and financial forecasts showing how funds will be used.
• A copy of the latest accounts (if available).
• An up‑to‑date memorandum and articles of association, and any planned changes.
• A register of members showing current shareholders.
• Draft documents you intend to share with investors, such as information memoranda and subscription agreements.
• Details of how much money you plan to raise and how the investments will be used.
• Evidence of potential investors and their intended investment amounts, if known.

Step 2: Submit to HMRC

Once documents are prepared, submit your application through HMRC’s online system. The digital form collects information about the company, the proposed investment and investor details. You must attach your supporting documents. For companies raising funds for the first time or those using crowdfunding platforms, HMRC expects you to provide names and addresses of potential investors. If you are applying via an agent, you must include a signed letter authorising them to act on your behalf.

Although HMRC does not charge for advance assurance, response times vary. According to the EISA guide, responses can take 4–5 weeks, and HMRC aims for a 15‑working‑day turnaround. SeedLegals reports that approval times can range from one to eight weeks, with straightforward cases being approved faster. To manage investor expectations, factor in potential delays when planning your fundraising timeline.

Step 3:  Receive and Use the Assurance Letter

If HMRC agrees that your proposed share issue is likely to qualify, you’ll receive an advance assurance letter. This provisional HMRC approval can be shown to investors as part of your funding deck or due diligence data room. Keep in mind:

• The letter pertains only to the specific share issue described; subsequent funding rounds require fresh applications.
• Companies submit SEIS1/EIS1 compliance statements, then receive authorisation to issue SEIS3/EIS3 certificates to investors.
• If any details change between your application and issuing the shares, inform HMRC. Failure to do so may invalidate the assurance.

After receiving the letter, founders typically include it in investor due diligence packages. It signals that the company has met a key regulatory milestone, reducing friction in negotiations and enabling faster completion of term sheets and share purchase agreements.

Common Reasons for Advance Assurance Rejection

Despite its optional nature, many companies are denied advance assurance. Understanding the most frequent causes will help you avoid delays.

Incomplete Documentation

The leading reason for rejection is missing or incomplete paperwork. Sprintlaw notes that providing the wrong or missing documents is the number‑one cause of delays or outright refusals. HMRC requires a business plan, financial forecasts, draft investment documents and a register of members; failure to include any of these can result in a swift rejection without feedback.

Non‑Qualifying Trades or Structures

HMRC will reject applications if the company carries on an excluded trade (such as banking, financial services or property development). In addition, the company must be independent and unquoted; complex corporate structures or arrangements aimed at preserving capital may trigger the disqualifying arrangements rules. HMRC’s risk‑to‑capital guidance emphasises that the company must intend to grow and develop and that investors’ capital must be at significant risk. Transactions designed to guarantee returns or circumvent risk will not qualify.

Missing Investor Details

Since 2018, HMRC has required details of potential investors for most advanced assurance applications. Applications without at least one named investor often fail. If you don’t yet have investors lined up, consider identifying a committed angel or venture fund willing to be named. Alternatively, platforms like Undo Capital track investor commitments during your raise and automatically populate investor details into the application (see next section).

Other reasons include applying too early (before your legal structure or documents are ready), not explaining how funds will be used, or including arrangements that effectively guarantee the investor’s return.

How Undo Capital Simplifies the Process

Navigating SEIS/EIS rules can be daunting, especially when dealing with term sheets, cap tables and investor compliance. Undo Capital offers an integrated solution for UK startups seeking SEIS/EIS investment. According to the platform’s website, Undo Capital handles everything, SEIS/EIS, investor agreements, share issues and filings, in one automated platform. Here’s how it helps:

• Smart forms and AI‑powered validation. Undo Capital’s S(EIS) advance assurance module uses smart forms, document templates and AI validation to pre‑fill your HMRC application. This reduces human error and helps you meet HMRC’s documentation requirements.
• Funding round setup and legal document generation. You can structure your funding round, set your valuation, share price and targets, and generate all required legal documents within the platform. These documents are compliant with SEIS/EIS rules.
• One‑click share issue and Companies House filings. Undo Capital automatically creates share certificates, SH01 forms and board minutes. Everything is pre‑formatted for Companies House and investors.
• Automated SEIS/EIS compliance statements. The platform generates and files SEIS1 or EIS1 forms and tracks real‑time status to ensure investors receive tax reliefs.

Cap table management and investor compliance. Undo Capital maintains a clean cap table, tracks share movements and investor classes, validates investor eligibility and monitors investment caps. It also performs background checks to ensure investors meet SEIS/EIS conditions.

By automating the SEIS/EIS approval process and related tasks, Undo Capital reduces the administrative burden on founders and decreases the risk of rejection. When appropriate, we will insert calls to action throughout this article, inviting readers to use Undo Capital to streamline their advance assurance preparation.

Why Automation Matters

Manual SEIS/EIS applications require collating documents, cross‑checking eligibility and populating government forms. Mistakes, such as forgetting an investor or misreporting share classes, can delay or derail fundraising. Using a platform that integrates your cap table, investor onboarding, compliance statements, and fundraising documents ensures everything is up‑to‑date and consistent. For busy founders juggling product development and investor relations, this can mean the difference between closing a round on time or losing momentum. Undo Capital’s mission is to help startups raise and manage their funding round with S(EIS) built in.