SEIS and EIS encourage individuals to invest in smaller, higher-risk companies. For a company raising money, the benefit is simple: the tax reliefs can make the investment easier to justify.
The tax reliefs can help, but they are not enough on their own. The company still needs to be a good investment. Before applying to HMRC for advance assurance, it should check that it qualifies and be ready to answer the questions investors will ask.
What are the tax benefits?
Under SEIS, an investor can claim Income Tax relief equal to 50% of the amount invested. The annual investment limit is £200,000, giving a maximum Income Tax reduction of £100,000.
Under EIS, the relief is 30%. An investor can usually claim relief on up to £1 million each tax year, increasing to £2 million where the amount above £1 million is invested in knowledge-intensive companies.
The relief is limited to the investor’s UK Income Tax liability. An investment can also be carried back and treated as made in the previous tax year, subject to the limits and available tax liability for that year.
So, someone investing £100,000 could receive £50,000 of Income Tax relief under SEIS or £30,000 under EIS. That reduces the amount of their own money at risk, although it does not stop them losing money.
There are other possible reliefs:
- Tax-free growth: a gain on the SEIS or EIS shares can be free of Capital Gains Tax if the shares are held for at least three years and the Income Tax relief is not withdrawn.
- Loss relief: if the company fails or the shares are sold at a loss, further relief may be available on the loss after deducting the original Income Tax relief.
- EIS deferral relief: Capital Gains Tax on a gain made elsewhere can be deferred by investing in qualifying EIS shares. The gain normally comes back into charge later.
- SEIS reinvestment relief: 50% of a gain reinvested in qualifying SEIS shares can be exempt from Capital Gains Tax, with a maximum exemption of £100,000.
The result depends on the investor’s own tax position. Relief can also be lost if either the company or the investor breaks the rules.
Which scheme applies?
SEIS is aimed at very early-stage companies. Broadly, the company must have fewer than 25 employees, gross assets of no more than £350,000 and a qualifying trade no more than three years old. It can raise up to £250,000 under SEIS.
EIS is available to larger businesses. For shares issued from 6 April 2026, most companies can raise up to £10 million in a 12-month period and £24 million over their lifetime. The gross-assets limits are £30 million immediately before the investment and £35 million immediately afterwards. Higher fundraising limits apply to knowledge-intensive companies.
These are only the headline limits. The age of the trade, earlier fundraising, group structure and business activities can all affect eligibility.
What can a company do to give investors confidence before an SEIS or EIS fundraising?
One of the most effective steps is to obtain advance assurance from HMRC. Although not mandatory, advance assurance allows a company to demonstrate that it has considered the SEIS or EIS conditions, provided the relevant information to HMRC and received HMRC’s view that the proposed investment is likely to qualify for tax relief.
While it is not a guarantee, it can provide reassurance to prospective investors and help identify any issues before the fundraising begins.
Do I need a clear reason for raising the money?
Yes, you need to know how much is needed, what it will be spent on and what the business should achieve. “Recruitment and marketing” are not enough without some detail.
Do you have something to show investors?
This might be early sales, customer trials, a prototype, contracts, active users or a believable pipeline. The evidence will vary, but there should be something behind the forecast.
Does my forecast need to be perfect?
The forecasts do not need to be perfect, but they should be sensible and realistic and show when more funding may be needed.
How do I ensure a clean ownership position?
Prepare an up-to-date cap table covering shares, options, loans and earlier investment agreements. Check that the proposed share rights work for SEIS or EIS before promising terms to investors.
Do I need investor interest first?
HMRC does not normally provide advance assurance for a purely theoretical fundraising. A first-time applicant will generally need to identify potential investors or show that it is working with a fund, promoter or crowdfunding platform.
Advance assurance is only the first step, what do I do next?
Advance assurance is HMRC’s view, based on the information supplied, that the proposed investment is likely to qualify. It is not a guarantee or an endorsement of the business.
After the shares are issued, the company must submit an SEIS1 or EIS1 compliance statement. Investors cannot claim the relief until the relevant certificate has been issued. The conditions must then continue to be met for the three-year qualifying period.
Why is timing key for SEIS and EIS?
SEIS and EIS can be a real help when raising money. The best time to check the rules is before the fundraising documents and share terms are agreed, not after the money arrives.
How can an accountancy firm help me with SEIS and EIS?
Our tax team can review eligibility, help with advance assurance, draft supporting documentation and deal with the compliance process after the investment. We will be on hand to answer technical questions during the process. We can also support investors with tax relief claims.
