What Is SEIS Advance Assurance?

Introduction

Early‑stage investors are cautious. They look for signals that a young company is serious and compliant. One such signal is SEIS advance assurance UK, a conditional confirmation from HMRC that a startup appears to meet the requirements of the Seed Enterprise Investment Scheme. This article is a SEIS advance assurance explained guide for founders. Although advance assurance is not legally required, angels and seed funds in the UK routinely ask for it before they will discuss terms. Investors are attracted to SEIS investor tax relief because it offers up to 50% income tax relief and exemptions on capital gains. Without assurance, investors may worry that relief will be denied and the risk to capital will be higher. Obtaining SEIS HMRC approval signals professionalism and helps secure funding.

This guide explains what SEIS advance assurance is, how the HMRC review process works, what the assurance letter confirms, and why it is a critical step before fundraising. It also addresses common misunderstandings, describes when to reapply, and shows how Undo Capital’s automated platform makes compliance easier. Throughout, we cite official HMRC guidance and reputable sources, and provide concrete examples and costs to help founders plan.

What Exactly Is SEIS Advance Assurance?

At its core, SEIS advance assurance is a conditional pre‑approval. When a company applies, HMRC reviews the proposed investment and the company’s circumstances to determine whether, if the shares were issued at that time, the company would likely qualify under the Seed Enterprise Investment Scheme. The resulting letter does not guarantee that investors will receive tax relief; it simply indicates that the company appears to meet the conditions. Investors use this letter during due diligence to assess whether the investment is likely to be eligible for SEIS.

The assurance is conditional because it is based on the information provided at the time of application. After the shares are issued, the company must submit a SEIS1 compliance statement to HMRC to claim the relief, and HMRC will then issue individual certificates to investors. Any change in circumstances, for example, issuing different types of shares, altering the business plan or using funds for non‑qualifying activities, can invalidate the assurance. In addition, the letter does not cover investors themselves; they must still meet requirements such as not being connected to the company and holding the shares for at least three years.

Why is the Assurance Conditional?

HMRC emphasises that advance assurance is not legally binding. It is a snapshot based on the company’s plan and proposed investment structure. If the company later issues shares in a different way or engages in non‑qualifying activities, HMRC may refuse relief. This conditionality is a common source of misunderstanding, explored later in this guide.

What Does the Letter Look Like?

The assurance letter is a brief document on HMRC letterhead. It states that, based on the information provided, HMRC believes the company would qualify for SEIS and that investors could be eligible for tax relief if they meet individual conditions. HMRC cannot confirm individual investor eligibility. The letter also reminds the company to file a compliance statement after issuing shares. Having this letter ready before fundraising demonstrates professionalism and preparedness.

Why Startups Need SEIS Advance Assurance?

While SEIS advance assurance is not legally mandatory, it has become a de facto requirement in the UK seed investment landscape. Here is why founders should prioritise obtaining it before approaching investors.

Pre‑seed investment in the UK is competitive, and due diligence can be onerous. Having assurance signals readiness and reduces friction in early discussions.

Investor Confidence

Early‑stage investors take on significant risk. They invest in unproven products, teams and markets. SEIS offers a cushion by allowing investors to claim up to 50% of their investment as a reduction in their income tax bill and to benefit from capital gains tax exemptions. Receiving tax relief depends on both the company and the investor meeting strict conditions. The advance assurance letter signals that HMRC has reviewed the company’s business plan, financial projections and share structure and believes it satisfies the qualifying criteria. This increases investor confidence because it reduces the risk that relief will be denied.

Reduced due Diligence Friction

Investors often ask for articles of association, a cap table, a business plan and financial projections. Having these documents ready for the advance assurance application makes due diligence smoother and satisfies many due diligence requirements. The assurance letter signals that HMRC has already considered the structure. Investors can then focus on the market and the team rather than eligibility analysis.

Competitive Advantage in Fundraising

Early‑stage fundraising is competitive. Many startups seek capital from the same pool of angels and seed funds. Investors often review several opportunities at once. Having SEIS advance assurance shows that a founder understands compliance and has taken proactive steps. Startups without assurance often lose deals to those who have it ready because investors may insist on seeing it before signing a term sheet. Preparing in advance helps avoid delays that can derail funding.

What the SEIS Advance Assurance Letter Confirms?

The HMRC SEIS advance assurance letter states that the company appears to meet the qualifying criteria under SEIS. To understand its value, it is important to know what HMRC checks during the review.

Eligibility of the Business under SEIS

HMRC looks at the company’s incorporation date, location and trading history. To qualify, a company must be established in the UK, have been trading for less than three years at the time of share issue, and carry on a new qualifying trade. The company cannot be listed on a recognised stock exchange and must not be controlled by another company. It must not be part of a partnership, and it cannot have previously received EIS or VCT investment. The assurance letter confirms that the company meets these conditions based on the information provided.

Qualifying Trade and Risk‑to‑Capital Condition

Only companies carrying on a qualifying trade are eligible. Excluded activities include dealing in land or financial instruments, banking, insurance, leasing, property development, and other asset‑backed businesses. HMRC also applies the risk‑to‑capital condition: the company must intend to grow and develop, and the investment must expose investors to significant risk. The assurance letter confirms that the proposed activity appears to be a qualifying trade and that the risk‑to‑capital condition is likely satisfied.

Age, Assets and Employees

SEIS applies to very young companies. The company must have been trading for under three years, have fewer than 25 employees and hold gross assets under £350,000. The assurance letter confirms that these thresholds are met.

Use of Funds and Share Structure

Funds must be used for growth or research and development within three years. The shares issued must be full‑risk ordinary shares without special rights. HMRC reviews the proposed articles and terms, and the assurance letter confirms compliance, but the company must follow through when issuing shares.

Investor Tax Relief

While the assurance letter focuses on the company, investors should understand what relief is available. Under SEIS, individuals can invest up to £200,000 per tax year and receive 50% income tax relief, plus possible capital gains exemptions. The assurance letter does not guarantee investor eligibility but indicates that the company’s structure should permit such relief if investors meet their own conditions.

SEIS Eligibility Requirements

The SEIS eligibility rules ensure that only genuine early‑stage, high‑risk companies benefit. These are the SEIS qualifying criteria that HMRC uses to assess your business. For a more comprehensive overview, see our guide to SEIS/EIS eligibility criteria.

In addition, the company must be incorporated in the UK and not previously have raised funds under EIS or VCT. Meeting these criteria is essential before applying for advance assurance.

How the SEIS Advance Assurance Process Works (Step‑by‑Step)

Obtaining SEIS advance assurance involves several structured steps and is often described as the SEIS approval process or “how to get SEIS advance assurance.” Many founders hire accountants or legal professionals to assist, though there is no HMRC fee for the application itself. Understanding SEIS documentation requirements up front will save time and reduce stress.

Step 1: Prepare Eligibility Documentation

This step is the start of SEIS advance assurance, and how it works. You need to compile key documents:

1. Business plan and forecasts. Provide a concise plan explaining your product, market and financial projections. HMRC wants evidence that you have a credible strategy for using the funds and growing.
2. Cap table and articles. Submit a current cap table and your articles of association. The articles must allow the issue of ordinary shares with no special rights.
3. Key declarations. Include the proposed investment amount and terms, a statement describing your qualifying trade and an explanation of how the funds will be at risk and used for growth. HMRC requires assurance that excluded activities are not a substantial part of your business and that the investment faces real risk.

Step 2: Submit Application to HMRC

Complete HMRC’s online form or email the documents. Include details of prospective investors if known, although unnamed investors are allowed. HMRC typically responds within a few weeks.

Step 3: Receive Assurance Letter

If HMRC is satisfied, it issues the SEIS advance assurance letter. Share it with investors. After shares are issued, file the SEIS1 compliance statement so HMRC can send SEIS3 certificates.

Common Misunderstandings About SEIS Advance Assurance

Despite being widely used, SEIS advance assurance is sometimes misunderstood. Addressing these misconceptions can save founders and investors from painful surprises.

“Does SEIS advance assurance guarantee relief?”

This is false. The letter merely indicates that the company appears to meet the criteria, and relief is only granted after shares are issued and a compliance statement is filed. Investors must still meet their own conditions, and the company must issue the shares exactly as described.

“One assurance letter covers all future rounds”

Advance assurance relates only to the round described in the application. If a company later raises another round, changes its business model or alters the share class, it should apply again so that assurance reflects the current facts.

“SEIS and EIS advance assurance are the same”

The Seed Enterprise Investment Scheme and the Enterprise Investment Scheme serve similar purposes but apply at different stages. SEIS is for companies under three years old with assets under £350k. EIS allows older, larger companies to raise more and gives investors a lower rate of relief. Founders often apply for SEIS first and EIS later; see our SEIS vs EIS advance assurance article for more.

When to Reapply or Update SEIS Advance Assurance

Advance assurance has a shelf life. Investors and HMRC expect the application and letter to reflect current facts. You should reapply or update your assurance if:

• Business model changes. If your product or revenue model changes in a way that might affect the qualifying trade or risk‑to‑capital test, you should inform HMRC.
• Investment terms change. A higher amount, a new share class or new investor rights can render your existing assurance obsolete. Reapply to avoid invalidating relief.
• Time passes. If more than a year has elapsed since the assurance letter and you have not yet issued shares, investors may ask for a refreshed letter. HMRC may require updated accounts or forecasts.
  
• New shareholders or cap table adjustments. Significant changes in ownership or control, or the issue of new shares outside the SEIS context, could affect eligibility. It is prudent to update the assurance.

Planning your fundraising timeline around these requirements prevents delays. Many founders apply for assurance just before launching a round so the letter is fresh, then update it if discussions continue.

How Undo Capital Streamlines SEIS Advance Assurance

Navigating SEIS can be daunting. Gathering documents, complying with HMRC rules and managing the cap table require precision. Undo Capital offers an automated platform that guides founders through document collection, cap table management and application preparation. It uses smart forms, pre‑fills HMRC applications and tracks compliance filing. Automation can reduce professional costs. For details, see our SEIS/EIS automation page.