VCM60370 - Venture Capital Schemes Manual: venture capital schemes: the Social Investment Tax Relief: advance assurance requests: responding to applications

The response to an application for an assurance will usually take the form of a statement as to whether, on the basis of the information provided, HMRC would be able to authorise the social enterprise to issue certificates under ITA/S257PC in respect of the shares or qualifying debt investment to be issued following receipt of a form VCSSITR1 satisfactorily completed.

The granting of an assurance is an indication that HMRC considers that the requirements in Chapters 3 and 4 of Part 5B are likely to be met insofar as it is possible for them to be met for the time being on the date the social enterprise provides its compliance statement.

An advance assurance does not indicate an acceptance by HMRC that the social enterprise will continue to meet all of the requirements which must be met throughout the qualifying period for the shares or debt investment. An advance assurance will not exempt the social enterprise from complying with the conditions necessary to ensure that a social enterprise’s investment remains qualifying. The social enterprise should make investors aware that the holding of an advance assurance does not guarantee that the investors are eligible to claim tax relief (they must meet certain conditions on an individual basis), or that tax relief will not be reduced or withdrawn at a later date. Where an assurance is given and shares or debentures are issued in reliance on it, the social enterprise will need to take care that the necessary conditions are complied with throughout the three year period related to the shares or debt investment.

In some cases there will be a clear indication in the social enterprise’s application for advance assurance that the social enterprise may at some future time within the three year period cease to satisfy one of the conditions (for example, excluded activities which the social enterprise intends to carry on might come to be a substantial part of its trade under ITA/257MQ). As explained above, the assurance given relates only to the likelihood of the requirements being met at the point at which HMRC is being asked to authorise the issue of compliance certificates to its investors. The assurance may include a reminder about the need for the social enterprise to meet the conditions for a continuing period, and may incorporate an explanation as to how it is proposed to apply the test in question (for example, how it is proposed to decide whether the excluded activities under ITA/257MQ make up a substantial part of the trade).

Where the officer is unable to give an advance assurance, a brief explanation of the reason will be given. It is entirely the responsibility of the social enterprise to decide what amendment, if any, it should make to its proposals as a result of an application being refused.

In some cases 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. In these circumstances HMRC may ask for further information or decline to give an advance assurance.

HMRC will not engage in further correspondence where an advance assurance has been issued. The social enterprise must submit a new application if the details of a prospective investment or any information about the authorised advance assurance changes.

HMRC aims to respond to most applications within 15 working days, and no later than 40 days. A response may take the form of an advance assurance, a rejection or a request for more information.

The social enterprise should follow the guidance in VCM60340 and VCM60380 to help them provide all the relevant information, to help minimise the time taken to consider the application.