SEIS Advance Assurance Rejected: What to Do Next
HMRC rejected your SEIS advance assurance application. Specialist guidance on the reasons, your options, and whether the investment can still qualify.
HMRC's refusal of a SEIS advance assurance application is one of the most disorienting moments for an early-stage founder or their adviser. You followed the process, submitted what seemed like a complete application, and HMRC has come back saying it will not give advance assurance.
The question is: what does rejection actually mean, and what can you do next?
This guide sets out why SEIS advance assurance applications are rejected, your options after a refusal, and whether the investment can still proceed.
Read our SEIS advance assurance application guide for the process and evidence required, or discuss a complex SEIS or EIS position with IP Tax Solutions.
What SEIS Advance Assurance Is (and What It Isn't)
Before addressing rejection, it is worth being clear on what advance assurance actually provides. The service is operated by HMRC's Venture Capital Reliefs (VCR) Team and is, in HMRC's own words, "a non-statutory, discretionary service." There is no right of appeal against a VCR Team decision.
An advance assurance is HMRC's view, at a point in time, that a proposed share issue would qualify for SEIS relief. It is not a guarantee. It does not cover individual investor eligibility. It does not confirm that the company will remain in compliance throughout the three-year holding period. It covers only the specific share issue described in the application.
Obtaining advance assurance is optional. The SEIS legislation in Part 5A of ITA 2007 does not require it. After issuing shares, companies use the statutory compliance process, submitting a SEIS1 compliance statement once the filing conditions are met. See s.257ED.
Advance assurance is simply a comfort mechanism, and most investors and angel networks expect to see it before committing funds.
Why HMRC Rejects SEIS Advance Assurance Applications
The VCM guidance at VCM60250 sets out the specific grounds on which HMRC will decline to give advance assurance. The most common in practice are:
The risk-to-capital condition is not satisfied. Under s.257AAA ITA 2007, the company must have objectives to grow and develop its trade over the long term, and investors generally must face a significant risk of losing more capital than their net investment return, including SEIS relief. HMRC considers all the circumstances. Revenue or asset ownership alone does not establish failure; the actual risk and any protective arrangements need assessment.
The company does not meet the issuing company conditions. Check the full requirements, including the new qualifying trade test. For current share issues, gross assets must not exceed £350,000 immediately before issue, applying the group rules where relevant, and the full-time equivalent employee number must be fewer than 25. Previous SEIS investment affects the remaining £250,000 headroom; it is not itself a blanket prohibition on a further issue. EIS or VCT investment in the issuing company, or a company that is its qualifying subsidiary at the SEIS issue date, on or before that day is a separate restriction. Sources: s.257DI, s.257DJ, s.257DK, s.257DL and s.257HF.
Disqualifying arrangements. HMRC may decline assurance where the proposed arrangements raise concerns under the disqualifying arrangements rules. Normal commercial subcontracting does not by itself prevent assurance. The context and parties must be examined, including whether the arrangement falls within the statutory rule. See VCM60260.
Insufficient information. The company must provide enough evidence for HMRC to form a view. This includes a commercial business plan, the proposed use of money and appropriate fundraising evidence. Companies that have never raised qualifying venture capital investment must meet the investor-evidence requirements for their direct or intermediary fundraising route. See VCM60220 and VCM60230.
Shares already issued. If the company has already issued the shares in question, HMRC will not process an advance assurance application - it defeats the object, "advance" assurance being the key here. The company must instead submit a compliance statement (form SEIS1(VCS) v2.1) through the statutory route.
The Most Common Practical Reasons for Rejection
In practice, the rejections I see most frequently fall into a smaller number of categories.
The trade timing rule. Under s.257HF, the new qualifying trade must not have begun more than three years before the current share issue, including where someone else previously carried it on. A pre-trading period is not automatically trading, but an earlier consultancy or predecessor trade needs careful factual analysis. There are also restrictions concerning other trades previously carried on by the issuing company or relevant subsidiaries.
Risk-to-capital in the structure. HMRC scrutinises term sheets and investment agreements closely. Investor protections that look commercially standard (anti-dilution provisions, preference on exit, repayment terms with limited downside) can undermine the risk-to-capital condition. The VCR Team is experienced at spotting structures that reduce investor exposure to genuine capital loss.
Narrative inconsistency. Applications fail where the business plan, use-of-funds narrative, and Articles of Association tell a slightly different story. HMRC looks across all submitted documents for inconsistencies. A pitch deck suggesting the business is a vehicle for a single contract project rather than a growing trading company will create doubt about the long-term growth requirement under s.257AAA ITA 2007.
Speculative applications. A company that has never raised investment under a qualifying venture capital scheme must demonstrate credible fundraising. For a direct raise, provide prospective investor names, addresses and intended amounts. Fund manager, promoter and crowdfunding routes have their own evidence requirements. Merely approaching an intermediary is not enough. See VCM60230.
Your Options After a SEIS Advance Assurance Rejection
A refusal is not a final determination that SEIS relief is unavailable. It is important to understand what it does and does not mean.
An advance assurance refusal is distinct from HMRC's subsequent decision on a statutory compliance statement. It does not by itself determine the eventual tax treatment, but the underlying concern must be addressed. See VCM60250.
That said, a refusal is a meaningful signal. It tells you that HMRC's current view is that the investment either does not meet the conditions or that there is insufficient information to confirm that it does. You have four practical options.
Reapply with a restructured or better-evidenced application. If the refusal was based on insufficient information, a more complete resubmission may succeed. If it was based on a structural issue such as risk-to-capital, restructuring the investment and reapplying may resolve the problem. Note that HMRC engages in no more than two rounds of correspondence after issuing an initial opinion (VCM60270), so each round needs to be well-prepared.
Restructure the investment and the company. Sometimes the refusal identifies a genuine problem that needs to be addressed before shares are issued. This might involve revising the share rights, removing preference-like protections from the term sheet, clarifying the use of funds, or addressing the trade timing issue. Getting this right before issue is considerably easier than trying to fix it after shares have been allotted.
Issue shares without advance assurance and proceed through the statutory compliance route. A company can issue SEIS shares without advance assurance and then submit form SEIS1 to HMRC, which triggers the compliance statement process. This carries risk, particularly for investors who have committed funds before HMRC decides whether to authorise compliance certificates. In a situation where advance assurance has been refused, investors need to understand this risk clearly before proceeding.
Take specialist advice before doing anything else. Where HMRC has not given a clear reason for refusal, or where the reason given is technical (such as a risk-to-capital concern), it is worth getting specialist input before deciding on the next step. The wrong response, whether reapplying without addressing the underlying issue or issuing shares on the assumption the compliance statement will be approved, can result in investors losing relief they believed was secure.
A refusal of SEIS advance assurance is not, by itself, a determination that the investment does not qualify. But it is a signal that something in the application or the structure has not satisfied HMRC, and it should be treated seriously.
Can You Proceed Without Advance Assurance?
Yes, but with important caveats. After shares are issued, the company submits a SEIS1 compliance statement when the filing conditions are met. If HMRC authorises it, the company issues SEIS3 compliance certificates. Each investor must also meet their own conditions; the company's compliance process does not guarantee an individual's relief. See HMRC's SEIS guidance.
The difficulty after a refusal is one of investor confidence. Most sophisticated investors, and particularly angel networks and SEIS fund managers, will not invest without advance assurance in place. If advance assurance has been refused and you proceed to issue shares, you should document carefully the basis on which you believe the investment qualifies, and ensure investors understand that HMRC's approval of the compliance statement is not guaranteed.
For companies where advance assurance has been refused on risk-to-capital or structural grounds, proceeding to issue shares without resolving those issues carries real risk that HMRC will also refuse the compliance statement, leaving investors without relief.
When to Get Specialist Help
The advance assurance process is managed by HMRC's specialist VCR Team. The officers handling applications are experienced and apply the guidance carefully. Where an application has been refused, getting a generalist accountant to resubmit the same application with minor changes is unlikely to change the outcome.
In my experience, the cases that turn around after an initial refusal are those where a specialist with genuine SEIS/EIS technical depth reviews the entire proposition, identifies the specific issue (whether structural, factual, or presentational), and rebuilds the application on that basis. That might involve restructuring the share rights, adjusting the use-of-funds narrative, revising the business plan, or, in some cases, advising the founder that the current structure cannot qualify and needs to be rethought before any investment is made.
The same principle applies here as in HMRC enquiry defence more broadly: HMRC's specialist teams have seen every variant of these arguments. An application that does not directly address the reason for refusal will not succeed on a second attempt. If you are facing a SEIS advance assurance refusal, particularly one involving risk-to-capital, connected persons, or trade timing, getting specialist input before the next step is worth the investment.
Frequently Asked Questions
Can I appeal a SEIS advance assurance rejection?
There is no formal appeal mechanism. The advance assurance service is non-statutory and discretionary, and HMRC's guidance (VCM60210) states that no appeal rights are available against VCR Team decisions. The alternatives are to reapply with a revised application, to restructure the investment, or to issue shares and proceed through the statutory compliance route.
How long does HMRC take to process a SEIS advance assurance application?
HMRC aims to respond to most applications within 15 working days and complex cases within 40 working days. These are response aims, not guaranteed approval times. A response may be assurance, refusal or a request for information. See VCM60270.
What happens if shares have already been issued before advance assurance was obtained?
HMRC will not process an advance assurance application where the relevant shares have already been issued (VCM60250). The company must instead submit form SEIS1(VCS) directly. This is the compliance statement route and is how SEIS investor certificates are ultimately issued regardless.
Does a SEIS advance assurance refusal mean the company will not qualify for SEIS?
Not necessarily. Refusal of advance assurance does not settle the later statutory compliance decision. However, it identifies an issue to assess before investors commit funds. See VCM60250.
What is the risk-to-capital condition and how does it affect SEIS advance assurance applications?
The risk-to-capital condition in s.257AAA ITA 2007 requires long-term growth and development objectives and a significant risk of capital loss exceeding the investors' net investment return, including SEIS relief. The whole arrangement matters; steady income alone is not an automatic failure.
Can I reapply for SEIS advance assurance after a refusal?
Yes. A new application can be submitted if the circumstances have changed, the structure has been revised, or additional information is available. For ongoing correspondence about the same application, HMRC limits itself to two rounds after the initial opinion (VCM60270). A genuinely new application for a revised share issue would be treated as a separate matter.
What information does HMRC require in a SEIS advance assurance application?
The application needs a commercial business plan, forecasts, company and investment documents, an explanation of how the conditions are met and appropriate investor evidence. Share rights require careful review; a blanket statement that no preferential rights of any kind are permitted is too broad. Use HMRC's current application checklist and share requirements.
What to Do Next
If you have received a SEIS advance assurance refusal, the starting point is to understand precisely why. HMRC should have provided a brief explanation. In my experience, most refusals come down to one of three issues: risk-to-capital concerns in the structure, a trade timing problem, or insufficient information. Each requires a different response, and addressing the wrong issue will not change the outcome.
I advise founders, accountants, and corporate finance advisors on SEIS advance assurance applications and on resolving situations where an initial application has not succeeded. If you are dealing with a refusal and want to understand your options, get in touch or read more about Steve Livingston FCA and the work we do.
This is a highly complex technical area so none of the above should be interpreted as professional advice.
