Zapaygo have an SEIS Advanced Assurance letter from HMRC - its on the Crowdcube pitch. However we are not so sure that the company is eligible for SEIS.
Advanced assurance is entirely reliant on the information supplied by the company to HMRC. HMRC in turn withhold the right to turnover any allowances under SEIS and EIS when or if the time comes for the company to cash in - retrospectively. So the risk is all put on the shareholders who in light of the failure of the company or its sale, may have to repay the 50% income tax allowance they claimed. If the company makes it, then again it maybe that investors using SEIS will not be eligible to off set the capital gains.
This is a minefield. There is little or no case law relating to ECF investing as HMRC are waiting for a large payout before they pounce and there hasn't been one yet. Experts tell me it's bomb waiting to go off.
In the case of Zapaygo, there is ample evidence to show that the app called Zapaygo was in existence in 2014 or more than 2 years ago. As the owners then are the owners now, albeit using a different legal vehicle, SEIS is denied by the rules clearly set out by HMRC. Or is it?
Well that all hinges on the use of the word 'trading'. Zapaygo claim they were not trading in 2014. This article in the Birmingham Post suggests they were.
How can a company not trading sign a sponsorship deal with a Championship football club for two years?
One of the founders in the article makes this point -
"It is currently being used by leisure venues but it is our intention to sign up Birmingham retailers and I expect to have some more on board within the next few days.''
Zapaygo told us originally that - ''Neither I nor any other company traded an app of any sorts for two years prior to Zapaygo.'' Well that doesnt sit well with the Post article.
Now (after we showed them the Post article) they say - ''The app was in beta for a few months only and testing in venues, if that is still called trading it was still only a few months.'' Again this is not what the Post article says. But who knows. We have an opinion but it may well be wrong. We are just pointing out some facts that seem to have been left off the Crowdcube campaign.
Of course Crowdcube have no opinion as usual. Helpful bunch.