Introduction to this document

Social investment tax relief advance assurance letter

If you operate a qualifying social enterprise, you could attract potential investors using a government-approved tax relief.

When can you request advance assurance?

For social investment tax relief (SITR) to apply there are a number of conditions your company needs to meet under Chapter 5B Income Tax Act 2007. It is not unheard of for companies to issue shares only to have relief denied for issues that come to light later on.

 

In order to avoid this, HMRC’s small companies and enterprise centre (SCEC) offers an advance assurance (AA) service, where you can obtain a formal opinion as to whether your company meets the conditions for SITR ahead of the investment taking place. This gives you the opportunity to change anything that would prevent SITR from being available.

Benefits - example

Acom, a registered community investment company, is looking to issue some shares under SITR and requests an AA from HMRC. It sends its paperwork for review. Unfortunately, this contains anti-dilution clauses which are worded in such a way as to constitute a pre-arranged exit, and so the company would not qualify. The company amends its articles to ensure the clauses do not apply to the prospective shares or debentures before receiving the investments.

HMRC will usually follow its assurance opinion - as long as all relevant information has been supplied - however, it is important to note that it is not binding, and a positive AA should not be used as an indication of a guarantee when marketing your company to prospective investors. The AA only considers the conditions relating to the issuing company, and not the other conditions which apply to the individuals; these will be considered in turn upon the formal application for SITR after the investment.

How to join

Write to the SCEC setting out the circumstances around your potential investment, what the money is to be used for, etc. Obviously, you need to do this before the investment, so there is no time limit or deadline.

You might find it quicker to e-mail the letter to the SCEC at enterprise.centre@hmrc.gsi.gov.uk.

 

Document

Social investment tax relief advance assurance letter

UPDATED14 Feb 2019
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