Section IV of 8

What a strong application contains

The five documents, the specifications, the order they go in.

Sections II and III covered what HMRC tests for and what language gets caught. This section covers what each of the five documents in a complete application actually needs to contain. Treat it as a specification rather than a template. The substance has to come from your business; the structure is the same for every applicant.

The order matters. HMRC reads in the sequence covering letter, application form, business plan, financial model, and constitutional documents – pulling the pitch deck and articles as needed. Your build order should run the opposite way: assemble the constitutional documents, finalise the financial model, write the business plan, complete the application form, and draft the covering letter last. The covering letter is where you reconcile everything you have already prepared. Write it first, and you will be writing a pitch. Write it last, and you will be writing a structured argument.

The reason for the inversion is structural. The legal and numeric base – articles, cap table, financial model – does not move. The narrative documents that sit on top of them can be written to match. Build the way the documents need to be true, then write the documents that need to be consistent with that truth. Build the other way around, and contradictions surface only at submission, when fixing them is most expensive.

The covering letter. One to two pages, no more.

Document one of five.

The covering letter has six jobs. Each maps to a test in Section II. In a well-structured letter, the caseworker can identify which paragraph addresses which test on a single read. The one-to-two-page limit is firm: anything longer is almost always a "journey" narrative working its way back in, and the language audit in Section III named those phrases as the cardinal weakeners. Resist them in this document above all others.

iThe trade

Test I

One sentence naming what the company does, in plain English, mapped to a qualifying activity. Not the pitch; the trade.

iiThe scheme and the amount

Tests VI, VII, IX

Which scheme (SEIS, EIS, or SEIS then EIS), the amount being raised, the share class to be issued, and confirmation that the company is within the age, size, and prior-funding limits.

iiiThe use of proceeds

Test II

Three to five line items mapping to growth activities. Any non-qualifying spend ringfenced and explicitly funded outside the scheme tranche. The time horizon (three years for SEIS, two for EIS) called out.

ivThe share class

Test III

One sentence confirming ordinary shares, fully paid in cash on issue, no preferences, no redemption, no pre-arranged exit. If the round involves a separate non-scheme class, note its existence and the structural separation.

vThe independence and control position

Tests V, VIII

The applicant is an independent UK-resident company with permanent establishment in the UK and no controlling-company history. Where the structure is non-obvious (subsidiaries, recent restructures), explain in this paragraph rather than leaving HMRC to infer.

viThe risk-to-capital statement

Test IV

Three to five sentences grounded in your specific business. Name the growth objective, the principal risks, and the time horizon. Avoid the boilerplate; the test reads for substance.

The application form. Direct, complete, internally consistent.

HMRC's online form for advance assurance is short. The fields that cause refusals are the free-text ones – trade description, use of funds, share class detail – where founders tend to either write too little or contradict their own covering letter.

The fields that matter most

Trade description.

Identical to the trade sentence in the covering letter, with two or three sentences of detail on what the company sells, to whom, and how it earns revenue. Match it to a recognisable qualifying-trade category.

Use of proceeds.

The same three to five line items as the covering letter. Quantify where you can. State the time horizon. If any non-qualifying tranche exists, name it and confirm it is funded outside the scheme.

Share class.

"Ordinary shares, fully paid in cash on issue, ranking pari passu with all existing ordinary shares; no preferential rights; no rights of redemption; no pre-arranged exit." Verbatim consistent with the articles.

Date of first commercial sale.

The exact date, verifiable against the financial statements. If pre-trading, state "no commercial sale yet – the company is pre-trading and the trading clock has not started."

The business plan. What HMRC actually reads.

HMRC does not read a business plan the way an investor does. They are looking for confirmation of the qualifying trade, evidence of growth-and-development ambition, and a financial picture that supports the use-of-proceeds claim. Seven sections, in this order, cover what they need.

iExecutive summary

Half a page. Names the trade, the round, the use of proceeds. Reads as a précis of the covering letter.

iiThe trade and the product

What the company sells, to whom, how the revenue model works. Plain English, no investor jargon. Maps to Test I.

iiiMarket and growth opportunity

Where the growth is, why this raise is sized to pursue it. Maps to Test IV's growth-and-development limb.

ivUse of proceeds, in detail

Each line item from the covering letter expanded: what is being funded, why, and over what time period. Maps to Test II.

vRisks and how they are managed

The principal risks named specifically. The actions being taken to manage them. Maps to Test IV's risk limb.

viTeam and structure

Founders, key hires, ownership position. Confirms independence at Test VIII.

viiFinancial summary

Headline numbers from the financial model. The detailed model is a separate document.

Two practical notes. Appendices – detailed market analysis, technical annexes, competitor matrices – are optional for eligibility purposes and largely unread by HMRC. They are valuable to investors and irrelevant to the advance assurance decision. Founders routinely over-invest in them at the expense of the seven sections above. And for pre-trading companies: the absence of historic financials is not a weakness. The financial model and the R&D narrative carry the weight where historic numbers do not yet exist. A strong pre-trading plan looks different from a strong trading one; it does not look thinner.

The financial model. Read for substance, not for arithmetic.

HMRC is not auditing your model. They are checking that the line items in the use-of-proceeds match the spending pattern in the model, that the model shows genuine growth ambition, and that the funding ask is sized to the demonstrated funding gap.

Line items worth presenting separately

Operating costs by category.

Engineering, sales and marketing, general and administrative – broken out enough that the use-of-proceeds line items in the covering letter map visibly to spend in the model.

Hiring plan.

Headcount by function, by quarter. Shows that the engineering tranche of proceeds funds engineering hires; the sales tranche funds sales hires.

Revenue by stream.

If the company has multiple revenue lines, each should appear separately. Bundled into a single "revenue" line, HMRC cannot verify that the trade is what you have said it is.

Cash position and funding gap.

The model should show the funding need this round is sized to fill. A round sized far above the demonstrated gap is a Test IV signal (risk-to-capital): the application looks like an attempt to maximise tax relief rather than fund the trade.

What HMRC does not want

Heavy use of "working capital" or "general operating" as catch-all categories. Long-dated profitability that contradicts the use-of-proceeds time horizon. Revenue lines that read as royalties, rental, or financial fees without explanation. Asset-heavy balance sheets that contradict the risk-to-capital claim.

Articles and cap table. The constitutional layer.

The articles of association and the current cap table are the documents HMRC verifies against the rest of the application. Discrepancies between what the application says and what the constitutional documents show are read as the most honest version of what the company is.

What must be true in the articles

The SEIS or EIS class is defined as ordinary shares with no preferential rights, no rights of redemption, and no rights of repurchase. Where multiple classes exist, the SEIS or EIS class is clearly distinguished from any preferred or non-scheme class. The articles should be in their current state at the date of application – not a previous version, not a draft.

A practical step worth taking: have your lawyer confirm that the articles version being referenced in the application matches the version filed at Companies House. A common failure pattern is submitting against a freshly-amended articles document that has not yet been filed, or against a draft amendment that will be filed shortly. HMRC reads the public filing, not the draft on your desk.

What must be true on the cap table

The current ownership position before the new issue is documented and matches the application form's answers on control and independence. Any pre-existing scheme funding (SEIS, EIS, VCT) is shown, with the relevant amounts and dates. Where ownership has changed recently, the cap table reflects the position immediately before issue, not the position as of the last accounts.

The submission checklist

Detach and print. Everything that must be true at the moment of submission. One page. Read down it before clicking submit. Every box should be checked, or the answer should be a deliberate, documented decision rather than an oversight.

The nine tests · substantive eligibility

  • The trade is qualifying, with no substantial element of an excluded activity (Test I).
  • The use of proceeds is qualifying. Non-qualifying spend is ringfenced and disclosed (Test II).
  • The shares are ordinary, fully paid in cash, with no preferences, redemption, or pre-arranged exit (Test III).
  • The risk-to-capital statement is specific and grounded in this company's facts (Test IV).
  • The company is unquoted (AIM is permitted) and has a permanent establishment in the UK (Test V).
  • The company is within the trading-age window: three years for SEIS, seven for EIS, longer for KICs (Test VI).
  • The company is within size limits immediately before issue: £350k gross assets / 25 FTEs (SEIS), £15m / 250 FTEs (EIS) (Test VII).
  • The company has never been controlled by another company; no acquisition arrangements pre-arranged (Test VIII).
  • Prior scheme funding totals are within the lifetime and annual caps; SEIS before EIS in order of issue (Test IX).

The five documents · completeness

  • Covering letter, one to two pages, addresses all six [[covering-letter items|/guide/aa-readiness-playbook/strong-application#covering-letter]].
  • Application form completed; every free-text field consistent with the covering letter.
  • Business plan complete in the [[seven-section order|/guide/aa-readiness-playbook/strong-application#business-plan]].
  • Financial model shows line items mapping to the use-of-proceeds; revenue streams broken out; funding gap visible.
  • Articles of association current; SEIS or EIS class defined as plain ordinary; no preferences in any class being issued to scheme investors.
  • Cap table reflects the position immediately before issue; prior scheme funding shown.

Consistency across documents · Section III audit

  • Trade description matches across application, covering letter, business plan, articles, and pitch deck.
  • Share class language matches across application, articles, and any circulating term sheet.
  • Use of proceeds matches across application, business plan, and pitch deck.
  • Cap table matches the share register, founders' agreement, and application form.
  • First-commercial-sale date matches the application, the accounts, and the business plan.

Red-flag language · Section III substitution audit

  • Pitch deck reviewed against the [[five slides|/guide/aa-readiness-playbook/red-flag-language#pitch-deck-audit]].
  • [[Substitution vocabulary table|/guide/aa-readiness-playbook/red-flag-language#substitution-vocabulary]] applied to all documents.
  • Covering letter first paragraph names the trade, the scheme, the amount, and the share class.
  • The substitution table has been re-run after the most recent rewrite. Last-minute edits routinely re-introduce risky nouns.

The application that gets approved looks the same on every read. The one that gets refused looks different each time.

The submission principle