Knowledge Base: Financial Models for HMRC

What is a financial forecast?

A financial forecast is a forward-looking summary of your company’s expected revenues, costs, and cash flow - usually over the next 3 to 5 years. It helps show how your business plans to grow and what impact investment will have. When you apply for SEIS or EIS Advance Assurance, HMRC uses your forecast to check that your company:

• Is aiming to grow and scale,
• Will use the investment in a qualifying way,
• Meets the key conditions of the scheme.

In short, it helps HMRC understand how the funding will support your long-term business goals - not just provide a return to investors.

We have put together a helpful list of key requirements your forecast should showcase to ensure it’s compliant with HMRCs requirements and doesn’t hold up your funding round.

What to Include in Your Forecast

1. Key financials in a standard format

Why HMRC care: They need to quickly understand how your business earns, spends and manages cash.

Your model doesn’t need to be complex. The most effective forecasts HMRC sees are clean, simple, and focused. At minimum, it should include:

• Revenue - how much you expect to earn (e.g., by product/service line).

• Cost of Sales - direct costs of producing your goods/services.

• Overheads - ongoing fixed costs (e.g., salaries, rent, software).

• Incoming Investment - SEIS/EIS or other funding you expect to raise.

• Cash Flow - month-by-month projection

FounderCatalyst’s 'minimum viable forecast model' is simple and easy to tailor to your business. Even better, we've never had queries from HMRC on this during the advance assurance process. It’s available for free from our resources centre.

2. Justification for the raise

Why HMRC cares: They must see the funding is necessary to reach your goals, not optional. You need to justify why you need to raise funds to reach your goals. The most effective way to do this is to show a shortfall in your cash flow forecast - highlight when your cash balance would go negative without the investment and ensure the size of that shortfall roughly matches the amount you plan to raise.

3. A 3 – 5-year projection

Why HMRC cares: They want to see sustainable growth, not just a short-term plan The minimum term for your forecast is 3 years. This must begin from either the current month or from when you expect to begin the funding round. This can be showcased on a month-by-month basis, or an annual basis – whichever is clearest for your business. We recommend avoiding including any historical data; HMRC focus on the future.

4. How the investment will be spent

Why HMRC cares: They need to see that investment is spread across activities that build long-term internal capability. HMRC wants to understand the impact of the investment, not just the amount you’re raising. You need to clearly present:

• Incoming investment - when the funds will be received and how much.

• Spending plan - exactly how the money will be used across different areas of the business.

• Post-funding position - what the company will look like once the funds are deployed.

Demonstrate exactly how the investment will be spent (e.g. product development, hiring, marketing).

• Internal hires - recruiting staff to build in-house capability.

• Marketing spends - campaigns, brand development, or lead generation.

• Product development - whether using in-house teams or external specialists.

• Operational expenses - essential tools, software, or infrastructure.

• External services - professional support, consultants, or agencies.

If the majority of your raise is allocated to a single external service provider, HMRC may question whether your company is genuinely building its own capacity to grow. They want to see investment in internal capability that drives long-term value. We recommend keeping this allocation to external services as minimal as possible.

5. Sources of Revenue

Why HMRC cares: They must confirm revenue is from a qualifying trade. Include your sources of revenue within a qualifying trade, this should tie in with your business model in your pitch deck. Showcase each product or service on its own line and match its associated cost of sales.

6. Demonstrate you are a genuine growth company

Why HMRC cares: They need evidence you’re scaling, not just sustaining. HMRC want to see your business is genuinely scaling and not just maintaining the status quo. You need to demonstrate evidence of growth through clear metrics such as:

• Revenue growth - show how your income is increasing over time, even in simple annual or monthly figures.

• Team expansion - highlight key hires or planned hires that indicate scaling capacity.

• Customer base growth - illustrate increases in active customers, accounts, or users.

• Market traction - show adoption of your product/service, such as signed contracts, recurring subscriptions, or partnerships.

7. Your documents must reconcile

Why HMRC cares: Any mismatch between your forecast and your pitch deck will raise questions.

Finally, if you make any amendments or alterations to your financial forecast and you’ve included snapshots of these in your pitch deck, make sure you’re also updating your pitch deck to ensure they both reconcile.

What to avoid

• Investor level complexity: no ROI or exit timelines. Keep it simple

• Overly ambitious projections: Stay realistic to remain credible.

• Excessive detail: don’t send a 50-tab spreadsheet; keep it simple.

If you have your own financial model which layers on different unit economics, scaling and additional products, we recommend adding these on a separate tab linking into a summary tab that produces the standard P&L format which HMRC expects.

Above all, keep it simple. HMRC will challenge your application if you overcomplicate your forecast model with an excessive number of tabs.

Further resources

Free Forecast Template - Check out our FREE minimum viable forecast model. It is simple to use and is easily tailored to suit your business. Even better… we’ve NEVER had any queries from HMRC on this model during the Advance Assurance process.

Forecast Models Demystified: Insights for Entrepreneurs - A 30-minute webinar hosted by our very own Sam Simpson, joined by Hatty Fawcett of Focused for Business, discuss forecast models, how investors judge them and HMRC’s thoughts on them.