VCM60420 - Venture Capital Schemes Manual: Venture Capital Trusts qualifying holdings: advance assurance requests: information needed

The company must explain how it meets each requirement in Chapter 4 of Part 6 of ITA 2007. It must draw attention in its application to each point of doubt with a full technical explanation as to why it believes the requirement is met.

The company must also give undertakings about its future intentions, such as to issue eligible shares or securities and carry out the qualifying business activity.

The company must disclose all the relevant facts that might affect the company’s eligibility under the scheme. It must provide all the information required in the advance assurance application form VCSAA v1.1 and VCT Checklist, and provide supporting documents as required. The checklist enables the company to explain to HMRC where all the relevant information and supporting evidence can be found, and to highlight areas of doubt. The relevant information must be fully signposted in the checklist; in order to manage demand for the advance assurance service, the Venture Capital Reliefs Team officer will not spend time identifying relevant information from the documents provided.

HMRC will not consider giving an assurance without the completed VCT Checklist with your advance assurance application.

Companies should ensure that they are aware of all the qualifying conditions of the scheme and provide any further information they think may be necessary to allow the officer to consider whether all the requirements are likely to be met. For instance, details of minority holdings in other companies, and details of other companies’ minority holdings in the issuing company, may be relevant in determining whether the ‘control and independence’ requirements will be met - see VCM55190).

Any assurance supplied to a company is given only on the basis of the information provided, see VCM60050. HMRC carries out a risk assessment of each application. It is the company’s responsibility to ensure it meets the scheme rules and to provide statements and evidence supporting its view that the company is eligible to receive investment under the scheme. HMRC will highlight any obvious errors or potential failures; otherwise HMRC will generally accept what is said in the application. Unless a company’s has identified particular conditions that may be in doubt.

An advance assurance based on limited disclosure will not be valid and VCTs cannot rely upon such an advance assurance when deciding whether to invest in a company. An investment reliant on an advance assurance based on inadequate disclosure cannot be assumed to be a qualifying holding.

Where a company flags an area of doubt the HMRC officer may ask further questions, or decline to provide an opinion if the information supplied is not sufficient to form an opinion.

Business plans

All companies seeking a relevant investment must have a business plan. This should not be a new document produced for advance assurance, but one that has already been provided or is to be made available to potential independent investors as part of any company’s normal commercial arrangements for seeking investment from the market. The business plan is a key document to persuade independent investors to invest in the company and should contain the same level of detail as any potential market investor or lender, for example a bank, would expect to see. Guidance on producing a business plan, and the matters to be covered, can be found on gov.uk.

The level of detail will vary depending on the size of the company, its development stage and the amount of investment the company is seeking. The larger the company and/or the investment, the greater the detail that will be required for example in terms of turnover and profit forecasts. All business plans should explain how the money is to be spent, including the relevant business activity, and give details of any follow-on funding that is likely to be needed.

Where the relevant investment is follow-on funding of an earlier relevant investment the business plan should also refer back to the earlier business plan and explain how the previous investment was used.

The business plan should also explain how the investment will lead to the company’s growth and development in terms of, for example, increased turnover or employees.