VCM60350 - Venture Capital Schemes Manual: venture capital schemes: the Social Enterprise Investment Tax Relief: advance assurance requests: circumstances where HMRC will not give an advance assurance

HMRC will not give an advance assurance where the relevant shares or qualifying debt investment have already been issued. In that situation the company should submit its compliance statement VCSSITR1 in accordance with the statutory procedure.

HMRC will not give an advance assurance if it is not satisfied that the social enterprise is likely to meet all the qualifying conditions (although HMRC will not normally refuse to give assurance solely on the grounds that the social enterprise may not spend the monies raised within the timescale required).

HMRC may decline to provide an opinion on an advance assurance application. This can be the case where:

  • the information provided, or the nature of the proposed activity, does not enable HMRC to come to a conclusion about whether a social enterprise would be eligible to receive an SITR investment
  • it appears the shares or qualifying debt investment may have been issued or subscribed for, for the purposes of tax avoidance.
  • HMRC considers the investment is the result of aggressive tax planning by pushing the boundaries of the law
  • HMRC considers the investment would be outside the principles or objectives of the scheme as set out in this guidance or elsewhere, for example where the terms of an investment would mitigate risk by ensuring that equity is repaid
  • a proposed investment exploits a loophole in the law that is contrary to the intentions set out in this guidance or elsewhere, including in the State aid guidelines

Refusal to grant an advance assurance does not indicate that HMRC has already reached a view about how the legislation will apply. Rather than attempting to form a view in advance of the social enterprise carrying out its intentions, HMRC may want to examine the facts at the time the social enterprise provides its compliance statement. This may include the circumstances in which funds have been raised, or activities commenced, shares or qualifying debt investment issued and directors appointed; along with the detail of transactions entered into by the social enterprise and any associated transactions entered into by third parties which might reasonably be considered to be part of a planned set of arrangements.