VCM14070 | Venture Capital Schemes Manual: the Enterprise Investment Scheme: income tax relief: company procedures: HMRC examining compliance statement

After the company has submitted its compliance statement EIS1 form (see VCM14020 to access the form), HMRC checks to ensure:

• the information given on form EIS1 is correct, and

• there is no reason not to accept the declaration given on the form.

HMRC may ask for further information where it is not clear that the company meets the conditions to be a qualifying company. 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 company would be eligible to receive an EIS investment.

HMRC does not consider the identity of the investors at this stage; investors are required to meet additional conditions based on their personal circumstances. These further conditions are considered as part of the investor’s claim to tax relief see VCM14140.

If HMRC is satisfied that the company meets the qualifying conditions, it must give the authorisation even if none of the subscribers listed are likely to be able to obtain relief (see Wild v Cannavan, 70TC554).

Interaction with advance assurance

In examining the statement the officer will consider whether any of the information supplied at any stage has proved inaccurate, including in relation to any advance assurance provided, and will explore any matters about which unsupported statements were originally accepted. Any changes to documents or conditions on which the advance assurance was given must be clearly highlighted. Where only draft documents were previously seen (for example, a draft prospectus), HMRC will require the final documents for their review.

As with the giving of advance assurances, HMRC is normally bound by a decision to authorise relief, so the company’s statement will be considered very carefully and any necessary clarification obtained before a decision is made.

Value received

If form EIS1 (see VCM14020 to access the form) shows that any of the listed subscribers, or any associate of such a person, has received value the implications of this for the availability of relief need to be considered. (See VCM11100 for meaning of associate.)

In this case, the amount of income tax relief that might be claimed by any subscriber will be affected. HMRC and the company will agree the amount to be recorded on the form EIS3 which will be issued to that subscriber.