The Enterprise Investment Scheme (EIS) is a government-backed initiative in the UK that encourages investments in early-stage, high-risk companies by offering tax incentives to investors. Obtaining EIS Advance Assurance can be a game-changer for startups seeking to raise funds, making your business more attractive to potential investors.
In this blog post, we’ll discuss the five key benefits of EIS Advance Assurance and why startups should consider applying for it.
How does EIS Advance Assurance work?
To obtain EIS Advance Assurance, a company must first apply to HMRC. The application must include details of the company, its business plan, and the proposed share issue. HMRC will then assess the application and decide whether to grant the assurance.
How to apply for EIS Advance Assurance
A company must submit an application form to HMRC to apply for EIS Advance Assurance The application form can be found on the HMRC website. The application form must include details of the company, its business plan, and the proposed share issue. HMRC will then assess the application and decide whether to grant the assurance.
Benefit 1: Attract more investors
One of the primary reasons startups should apply for EIS Advance Assurance is to make their business more appealing to potential investors. By obtaining advanced assurance, you signal to investors that your company is eligible for the EIS tax incentives, which can motivate them to invest.
EIS offers investors significant tax benefits, including:
- Income tax relief of up to 30% on the amount invested
- Capital gains tax deferral on any gains made on the sale of the investment
- Tax-free capital gains on any gains made on the sale of the investment after three years
- Loss relief on any losses made on the investment
- Inheritance tax relief on the value of the investment
Benefit 2: Faster fundraising process
When you have EIS Advance Assurance, you streamline the fundraising process by reducing uncertainty for potential investors. Investors will know that their investments in your company will likely qualify for EIS tax reliefs, making the due diligence process faster and more straightforward. This can help you close funding rounds more quickly and deploy capital to grow your business sooner.
Benefit 3: Confidence boost for investors
EIS Advance Assurance gives investors an extra layer of confidence in your company. It demonstrates that your business has been assessed by HM Revenue & Customs (HMRC) and deemed to meet the EIS eligibility criteria. This assurance can reduce the perceived risk of investing in your startup and be particularly attractive to investors new to the EIS scheme.
Benefit 4: Early identification of potential issues
Applying for EIS Advance Assurance requires you to submit detailed information about your company, its structure, and its plans for using the funds raised. This process can help you identify potential issues affecting your EIS eligibility before you start your fundraising efforts. Addressing these issues early on can save you time and effort in the long run and ensure you are well-prepared to raise funds under the EIS scheme.
Benefit 5: Competitive advantage
With the growing popularity of EIS investments, startups that have secured EIS Advance Assurance can stand out from the competition. Investors often have multiple investment opportunities, and having advanced assurance can give your startup a competitive edge, making it more likely that investors will choose to invest in your business.
Obtaining EIS Advance Assurance can benefit your startup significantly, making your business more attractive to potential investors and streamlining the fundraising process. By applying for advanced assurance, you can boost investor confidence, gain a competitive advantage, and identify potential issues before they become roadblocks in your fundraising journey. If your startup seeks to raise funds and meets the EIS eligibility criteria, applying for EIS Advance Assurance should be a top priority.
Here are some additional tips for applying for EIS Advance Assurance:
- Make sure that you have a well-written business plan. The business plan should be clear, concise, and persuasive. It should also include a detailed financial forecast.
- Get professional advice. If you are unfamiliar with the EIS scheme, getting professional advice from an accountant or financial advisor is a good idea.
- Be patient. The application process for EIS Advance Assurance can take several weeks.
If you want to learn more about EIS Advance Assurance or think your startup may be eligible, please contact us today. We’d be happy to help you get started.