Key Takeaways
- An Advance Subscription Agreement (ASA) is a UK contract where an investor pays now and receives shares later, usually at the next funding round
- For SEIS or EIS, HMRC will not consider an ASA suitable unless the payment cannot be refunded, the agreement cannot be varied, cancelled or assigned, it bears no interest, and it has a longstop date
- HMRC expects the longstop date to be no more than 6 months from signing and is unlikely to give advance assurance beyond that
- SEIS or EIS relief is available only from the date the shares are issued, not when the money is paid
- A US-style SAFE is not designed for this: Y Combinator publishes forms for the US, Canada, the Cayman Islands and Singapore, but not the UK
- Company tests such as the SEIS £350,000 gross assets limit apply when shares are issued, so ASA cash can matter
- Apply for advance assurance before signing the ASA
An Advance Subscription Agreement is a UK contract where an investor pays now and receives shares later, usually at the next funding round. To stay eligible for SEIS or EIS, HMRC requires no refund, no interest, no variation, cancellation or assignment, and a longstop date, normally within six months.
This guide reflects HMRC's published manual as updated in October 2026. It is general information, not legal or tax advice, so have a UK solicitor draft the document.
How does an Advance Subscription Agreement work?
The investor pays the company today, and the company issues shares at a later trigger.
HMRC's SEIS guidance on ASAs describes them as a way to raise funds quickly when the value of the shares cannot be easily ascertained. The usual sequence is:
Pricing commonly uses a discount to the next round, a valuation cap, or both. Commentary from the Jonathan Lea Network notes these features do not automatically disqualify an ASA. The question is whether the terms, together with side arrangements, give the investor capital protection.
Before allotting, check that directors have authority and that statutory pre-emption rights have been dealt with under your articles or by shareholder resolution.
What does HMRC require for an ASA to qualify for SEIS or EIS?
HMRC will not consider an ASA suitable unless it meets four conditions, and the agreement must stay simple.
The four conditions appear in both the SEIS manual and the EIS manual page, VCM12025:
HMRC adds three further warnings:
The company must also be able to show how the timing and terms fit its business plan and its planned spending on growth. A vague "bridge to the next round" narrative is weak evidence.
How long can an ASA longstop date be?
Plan for six months or less.
HMRC's guidance has two parts that founders often merge:
So a longer longstop is not automatically fatal, but it removes the assurance most UK angels want before they wire. Practical drafting advice: set the longstop at no more than six months, and plan the company's funding runway around it. Legal commentary from Osborne Clarke flags the commercial problem: six months can be short if your next large round is expected later.
How does an ASA compare with a SAFE or convertible loan note?
An ASA is the UK instrument built around SEIS and EIS. A SAFE and a convertible loan note solve different problems.
Advance Subscription Agreement
SAFE
Convertible loan note
The comparison above is for UK-incorporated companies raising from UK taxpayers who want relief.
When can investors claim SEIS or EIS relief on an ASA?
Only after the shares are issued and the company has submitted its compliance statement.
HMRC says relief is available only from the share issue date, and form SEIS1 or EIS1 should not be submitted before then. An investor who signs in February for shares issued in July has no relief until after the issue. That matters for tax-year planning, because the investor's claim follows the issue date, not the payment date.
The conditions of the schemes also apply at the share issue, so an ASA does not lock in today's position. The SEIS company requirements include:
EIS rules are higher. Most companies can raise up to £10 million in any 12 months and £24 million over their lifetime, with gross assets of no more than £30 million before the issue and £35 million immediately after it. Knowledge-intensive companies have separate limits. Our SEIS and EIS guide covers investor reliefs in detail.
Watch the gross assets test. ASA money sits in the company's bank account before the shares are issued. If you take a large ASA and then issue SEIS shares, that cash may count toward the £350,000 limit. Model the balance sheet at the planned issue date and ask your adviser, particularly if you plan to use both schemes.
What do UK financial promotion rules mean for ASA fundraising?
Inviting someone to subscribe is likely a financial promotion, so you need an approved communication or an exemption.
Section 21 of the Financial Services and Markets Act 2000 restricts communicating an invitation or inducement to engage in investment activity in the course of business, unless an authorised person makes or approves it, or an exemption applies. Founders commonly rely on exemptions in the Financial Promotion Order, such as those for certified high net worth individuals and self-certified sophisticated investors.
Each exemption has conditions, including statements the investor must sign and warnings the communication must contain. US Regulation D concepts such as 506(b) do not apply to a UK offer to UK investors. Have your solicitor confirm the exemption before you circulate a deck, and keep the signed statements.
How do you run an ASA round step by step?
Treat the ASA as a short bridge to a defined share issue, not as a cheap alternative to a priced round.
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What is an Advance Subscription Agreement?
An Advance Subscription Agreement is a UK contract under which an investor pays money to a company now and receives shares later, usually at the next funding round or by a longstop date. It is often used when a share price is hard to set and investors want SEIS or EIS relief.
Is an ASA the same as a SAFE?
No. Both let a company take money before issuing shares, but an ASA is built for UK company law and HMRC's SEIS and EIS conditions. Y Combinator's standard SAFE forms cover the US, Canada, the Cayman Islands and Singapore, and include cash-out rights that sit badly with HMRC's no-refund condition.
Can an ASA have a valuation cap or discount?
Yes. Discounts and valuation caps are common in UK ASAs and do not automatically disqualify one from SEIS or EIS. The risk is any term, including side arrangements, that gives the investor capital protection. Have the pricing mechanics reviewed before you apply for advance assurance.
What happens if the longstop date passes with no funding round?
A properly drafted ASA requires the company to issue the shares by the longstop date at a price set by a formula in the agreement. The investor does not get the money back, because a refund right would conflict with HMRC's conditions for SEIS and EIS.
Can the longstop date be longer than six months?
It can, but HMRC is unlikely to give advance assurance if it is. HMRC also says a longstop beyond six months does not by itself make an investment ineligible when the compliance statement is reviewed. Most founders keep to six months because investors want assurance before they pay.
When do investors get SEIS or EIS relief on an ASA?
Relief is only available from the date the shares are issued. The company submits form SEIS1 or EIS1 after that date, and investors claim once the company has been authorised to issue compliance certificates. Payment under the ASA does not itself start the relief.