IN LIGHT of the November 2017 budget where the Chancellor announced the importance of supporting the R&D sector and growth of small businesses, why are we experiencing delays at the HMRC Enterprise Centre?
Confluence Tax’s Anne-Marie Rickels looks at the problems and what can be done.
Venture Capital Schemes, such as VCT, EIS and SEIS, encourage investment into high-risk companies and an investor will receive income tax relief via their self-assessment tax return, with the ability to make tax-free returns. Changes announced in the 2017 budget enhanced the schemes for knowledge-intensive companies. As you may expect, HMRC requires a company applying for these schemes to meet many conditions in order to be granted advance assurance.
This assurance gives investors the maximum certainty possible pre-investment that they will receive these reliefs on their investment. Some EIS, SEIS or VCT funds cannot invest without assurance. It is therefore essential that advance assurance can be obtained in a timely manner.
Anyone applying for VCT, EIS, SEIS advance assurance or seeking certificates for investors from HMRC is likely to have experienced delays recently. Certainly we have seen a lengthening of turnaround times, from 6-8 weeks, to 10 weeks, to most recently being informed that we will now have to wait 16 weeks for a response. HMRC has also advised it is operating on a strict first come, first served basis with no way of prioritising applications. In addition to the delays, the Enterprise Centre is no longer operating its telephone helpline and its automated email response states it will take 30 days to reply to emails.
Given that the R&D sector relies on Venture Capital Scheme investments and these deals with investors are expected to happen quickly, the delays we are experiencing are proving extremely frustrating for companies and investors alike.
We would like to think the delays are due to the Venture Capital Schemes becoming a victim of their own success. That HMRC is struggling to turn around the applications because there are so many and, as such, the Enterprise Centre is under-staffed as a result.
This may in part be true but with a lack of communication from HMRC we can only surmise. With an increase in demand comes a need for more staff, who are likely to be inexperienced. However, this does not mean with the increased timescales you are less likely to be asked questions. On the contrary, we are noticing an increase in queries from HMRC, not a decrease, adding to the delays being experienced by investors.
So, what can be done?
Firstly, apply for assurance as early as possible. This might be an obvious point, but the sooner you make an application the better. You may make an application with draft articles of association and provided only minor changes to the articles come later, the assurance will still be valid. Secondly, keep chasing HMRC if you do not hear anything after eight weeks. It is unfortunate that we have needed to raise complaints with HMRC in order to progress very delayed applications.
The intention to improve the assurance and certificate process by taking it all online remains a long-term plan and there was talk in the last budget of a plan to reduce delays.
There isn’t a lot else we can do for now except be patient and hope the situation improves as soon as possible. It is worth noting the service we used to receive was excellent, with quick turnaround times and the ability to talk to an experienced advisor on the telephone. Here’s to the old saying ‘you don’t know what you’ve got until it’s gone…’