As a new small business owner, garnering investor funding is crucial for survival. While many rely on angel investors or friends and family, SEIS and EIS relief are an often-overlooked growth mechanism that benefits small businesses and investors alike. Here’s everything you need to know about SEIS and EIS.

Grow your small business through SEIS and EIS

Recognising the difficulties often faced by small businesses and entrepreneurs when it comes to raising the finances needed for growth, the UK government introduced the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) initiatives. These schemes offer generous tax reliefs to investors who are willing to put their faith and money into young, ambitious companies.

If you are looking to raise money for your start-up or small business from outside investors, you may be able to make the deal more attractive by offering the benefit of SEIS or EIS.


Investing in startups is generally seen as riskier than buying shares in larger companies.

SEIS and EIS are two of a number of UK government initiatives which encourage innovation by granting private investors a significant tax break when investing in early-stage, ‘high-risk’ companies. The two schemes are similar, and they are often appropriately referred to as ‘sister schemes’, but differ in key ways.

What is SEIS

SEIS is focused on very early-stage companies and allows an investor to invest up to GBP 100,000 per tax year and receive a 50% tax break in return. The investor will also benefit from a Capital Gains Tax (CGT) exemption on any profits that arise from the sale of shares after three years.

What are the SEIS requirements?

  • The start-up must be based in the UK, or have a permanent establishment in the UK
  • It must be less than two years old
  • It must have less than GBP 200,000 in assets
  • It should own more than 50% of any subsidiary and the subsidiary cannot be controlled by another company
  • Qualifying companies will be able to raise up to GBP 150,000 under the scheme, and the funds raised must be used within three years

And the company must not:

  • Be listed on any recognised stock exchange
  • Have more than 25 employees
  • Trade in one of the scheme’s “excluded activities”
  • Be controlled by another company or a person
  • Be in partnership with another company
  • Use the money invested for payment of dividends to shareholders
  • Control another company which is not a qualifying subsidiary

What is EIS

EIS, on the other hand, focuses on medium-sized companies. It allows an investor to invest up to GBP 1 million per tax year and to receive a 30% tax break in return. As with SEIS, the investor will also pay no CGT on any profit arising from the sale of the shares after three years.

What are the EIS requirements?

  • The company must have fewer than 250 full-time employees at the time of share issue
  • The company can raise up to GBP 5 million each year, and a maximum of GBP 12 million in the company's lifetime
  • Within two years of the share issue, the company must employ the money raised by the share issue for the purposes of trade or research and development

And the company must not:

  • Be listed on a recognised stock exchange
  • Control any other company that is not a qualified subsidiary. The company may have subsidiaries, but it must own more than 50% of the subsidiary, and the subsidiary cannot be controlled by another company
  • Be controlled by any other company
  • Have gross assets exceeding GBP 15 million immediately before any share issue and GBP 16 million immediately after that issue
  • Trade in the scheme’s “excluded activities”. A company may have some excluded activities, but they should constitute no more than 20% of the company’s total activities

The shares must be:

  • Ordinary full-risk shares and cannot carry preferential rights to shareholders in the event of winding up the company
  • Paid in full

The investor must not:

  • Be connected to the investee company. “Connected” means the investor is a partner, director, or employee of the company, excluding angel investors (investors who receives no remuneration); or the investor controls the company or holds more than 30% of the share capital or voting rights in the company.
  • Trade under excluded schemes. This includes those dealing in land or commodities, those involved with banking, insurance or money-lending, those providing legal or accountancy services, those involved in property development and those generating and exporting electricity. There will inevitably be some grey areas that may need further analysis, but a useful point to note is that companies are only excluded from raising money under SEIS and EIS if a “substantial” element of their trade activity is considered “excluded”.

How to apply for SEIS and EIS

While these schemes are a great way to attract potential investors and accelerate growth, applying does involve quite a bit of paperwork.

1. Apply for Advance Assurance (optional)

For both SEIS and EIS, you can apply for an Advance Assurance. This is an optional application, which most applicants nevertheless choose to submit because – should it be approved – it offers your business a preliminary confirmation that it might be eligible for SEIS/EIS. Although this is not a formal guarantee from HM Revenue & Customs (HMRC) that you are eligible, it indicates that you are very likely to be, which is an encouraging sign for investors looking to come on board.

2. Submit a Compliance Statement to HMRC

Following that, you must file a Compliance Statement (aka SEIS1 or EIS1, respectively), whereby you provide HMRC with extensive information about your business, so that they can determine whether you are in fact eligible.

3. Receive authorisation from HMRC

Once your Compliance Statement is approved, you will receive confirmation from HMRC, in the form of a SEIS2 or EIS2 document. This will contain a unique reference number, which you will use to issue Compliance Certificates to your investors.

4. Send Compliance Certificates to investors

Once your Compliance Statement is approved, you will receive confirmation from HMRC, in the form of a SEIS2 or EIS2 document. This will contain a unique reference number, which you will use to issue Compliance Certificates to your investors.

Speak to an expert SME accounting consultant if you’re unsure your company qualifies

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Timing of SEIS investments

Timing is an important consideration. You can only allot SEIS/EIS shares once you have received the investment funds. This needs to be reflected in any shareholder/investment agreement and you will need to make sure that you hold the relevant board meetings and shareholder meetings to reflect that.

You cannot, for example, have an arrangement with an investor whereby the company allots them the shares, and they pay their investment to the company in tranches.

Why investors love SEIS/EIS

For experienced investors, the main appeal is the chance to invest in the newest and most exciting businesses with the added benefit of tax relief. With both SEIS and EIS, there is no inheritance tax to pay on shares held for at least two years and if shares are eventually sold at a loss, the investor may offset the loss against their CGT. Tax relief is also particularly appealing in the UK as taxes are at a historical high.

SEIS and EIS are purpose-built vehicles for startups to receive investment and the tax wrappers offered to investors exist to increase the amount of money available to these companies.

Grow your startup

It’s well-known that approximately 20% of new businesses fail during the first two years and nearly half fail before a company reaches the fifth year. A lack of financing is a major contributing factor.

One of the biggest challenges in the first part of a startup’s life is getting investors to take the same leap of faith you did when you decided to become a founder. When you are able to equip your investors with a SEIS/EIS certificate, they are guaranteed to get most of their money back in the form of tax relief – regardless of whether you succeed or fail.

If you are seeking investor funds through the SEIS or EIS, our team can provide a personalised accounting solution for you. To discuss a route that best suits you, contact us at, or give us a call on +44 (0) 20 7759 7553.

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