Most SEIS and EIS advance assurance refusals come down to a handful of avoidable issues, and almost all of them are fixable before you apply. The five we see most often are: the investment does not clearly meet the risk-to-capital condition, the company looks asset-backed or low-risk, there is no named investor, the trade is on HMRC's excluded list, or the application is rushed and inconsistent. None of these is a reason to panic. Below is what HMRC is really testing for in each case, and how to get on the right side of it.
First time through this? If you want the basics before the detail, our founder's guide to SEIS vs EIS advance assurance covers how the schemes work and what advance assurance actually is, and our SEIS and EIS tax relief calculator shows what the relief is worth.
1. Failing the Risk-to-Capital Condition
This is the single biggest reason applications are turned down, and it is worth understanding properly. The risk-to-capital condition is HMRC's overarching test, and it has two parts: your company must be raising the money to grow and develop, and the investment must carry a genuine risk that investors could lose their capital. If the arrangement looks designed mainly to deliver a tax-efficient, low-risk return rather than to fund real growth, it fails, however well written the rest of the application is.
The fix: make your growth story explicit. Show, in the plan and the forecasts, that the money funds genuine development, new product, new markets, hiring, and that the company intends to grow. Avoid anything that looks like capital preservation: guaranteed exits, arrangements that return investors' money regardless of performance, or structures that exist mainly for the relief. If the growth and the risk are both obvious on the page, you are most of the way there.
2. Looking Asset-Backed or Low-Risk
Closely related, and often the real reason a company quietly fails the risk-to-capital test. If most of your company's value sits in tangible assets, property being the classic example, or your income is contracted and predictable, HMRC may conclude the investment is not genuinely at risk. The schemes are for backing uncertain, growing ventures, not for funding something that behaves more like a safe asset.
The fix: be clear about what the money actually does. If you are a genuine trading company using the raise to build and sell a product or service, say so plainly and show it in the numbers. If your model is asset-heavy by nature, get advice early, because some activities simply do not fit the schemes, and it is far better to know that before you apply than after.
3. No Named Investor
HMRC will not even accept an application without at least one named prospective investor on file. Plenty of founders assume they get assurance first and find investors second, so this one stops applications before they start.
The fix: line up at least one real, identifiable investor who genuinely intends to put money in, before you apply. They do not need to have transferred funds yet, but a vague "we are speaking to some angels" will not do. We cover this, and the rest of the paperwork, in our guide to the documents you need for an advance assurance application.
4. An Excluded Trade
Some activities simply do not qualify, no matter how strong the rest of the case. HMRC keeps a list of excluded trades, and it includes things like dealing in land and property development, most financial activities, leasing, legal and accountancy services, and generating energy under certain subsidies. If a substantial part of what you do falls inside it, the application will be refused.
The fix: check your trade against the excluded list before you spend time on anything else. If you are clearly a qualifying trade, say so and move on. If you are near the line, or you have a mix of activities, get advice early, because the structure of your trade sometimes decides the answer, and that is easier to address before you apply than after a refusal.
5. A Rushed or Inconsistent Application
Even a company that qualifies can be refused, or sent round in circles, if the application itself is weak. Thin forecasts, a plan that does not show how the money is used, articles that are missing or carry unusual share rights, a pitch deck that contradicts the numbers: each of these gives HMRC a reason to question or decline rather than approve.
The fix: submit a complete, consistent pack the first time. Every document should tell the same story, the forecasts should follow from the plan, and the shares in your articles should be plain ordinary shares. Because there is no right of appeal once assurance is refused, the quality of the application is the thing most within your control, and the thing most worth getting right. If a slow process is your worry rather than a refusal, see how long advance assurance takes.
If You Have Already Been Refused
A refusal feels final, but it usually is not. Advance assurance is HMRC's opinion on the information you gave, not a binding decision, and there is no formal appeal precisely because you can address the issues and apply again with a stronger case. It is also worth remembering that advance assurance is not legally required to claim the relief: if your company genuinely qualifies, you can still issue shares and submit the compliance statement, and HMRC considers eligibility then.
The reassuring part: a refusal is a prompt to fix the application, not the end of your raise. Read HMRC's reasons carefully, work out which of the issues above applies, and rebuild around it. Most companies that are genuinely eligible get there on a second, better-prepared attempt.
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This article is a general guide and not tax or financial advice. SEIS and EIS eligibility, the risk-to-capital condition and the list of excluded trades depend on your circumstances and can change, so always confirm the current position with a qualified accountant or HMRC before you apply.