The Ultimate Guide to SEIS and EIS

Investment is crucial for the growth and success of small and medium-sized businesses. However, investing in early-stage companies can be risky, deterring potential investors. To address this concern, the government introduced two initiatives: the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS).

These schemes offer tax relief to investors who take the leap of faith and invest in smaller, budding businesses. They serve as a safety net for investors and provide much-needed funding for companies to expand and innovate. In this guide, we will delve deeper into the workings of these schemes and explore the benefits they offer.

Initiative 1: Seed Enterprise Investment Scheme (SEIS)

SEIS was established to support early-stage businesses by incentivising investors with substantial tax deductions. Under SEIS, individuals can invest up to £200,000 in a company and receive 50% Income Tax relief. Additionally, investors are exempt from Capital Gains Tax on profits from the sale of shares after a three-year holding period.

Businesses approved under SEIS instantly become more appealing to investors, reducing risk and increasing their value. In fact, early-stage businesses often offer a potential return on investment that can be double or triple the initial amount, making it a valuable asset for young businesses seeking investment. 

Initiative 2: Enterprise Investment Scheme


EIS targets more established, slightly larger businesses in search of investment. With lower risk involved, investors can invest up to £1 million per financial year, although the tax relief offered is 30% instead of the 50% provided by SEIS. Similar to SEIS, investors are exempt from Capital Gains Tax after a three-year holding period.

Both schemes also offer exemption from Inheritance Tax on shares held for at least two years. In the event of a loss from the sale of shares, investors can offset the loss against their Capital Gains Tax liability, mitigating the damage. 

Benefits of using SEIS and EIS Investment

Utilising SEIS and EIS investments can be a game-changer for businesses and investors alike. For entrepreneurs, these schemes offer a valuable opportunity to access much-needed funding to fuel growth and innovation. The funds received can be used to develop products, expand operations, invest in research and development, and ultimately drive the company’s success. Furthermore, the SEIS and EIS stamp of approval enhances the company’s attractiveness to potential investors, opening doors to additional funding opportunities.

On the other hand, investors can leverage the tax benefits provided by SEIS and EIS to mitigate risks and enhance their returns. By investing in eligible businesses, they can enjoy significant income tax relief, capital gains tax exemptions, and even capital gains tax deferral.

Funds obtained by eligible businesses must be utilised for “qualifying business activity,” which includes a qualifying trade, preparations for a qualifying trade within the next two years, or research and development (R&D) that leads to a qualified trade.

The funds raised must be spent within three years of the investment, and if it takes longer than two years to start trading, the money must be spent by the date trading commenced. The funds cannot be used to acquire all or part of another business, must pose a risk of capital loss for the investor, and should be used to grow or develop the business. 

Maximum Fundraising Limits for Businesses

SEIS enables businesses to secure funding of up to £250,000, whereas EIS extends the limit to £12 million. It is important to note that if a business has received any de minimis state aid within the preceding three years, that aid is taken into account when calculating the investment limit, potentially reducing the available investment amount.

In cases where a business qualifies for both SEIS and EIS, SEIS must be claimed initially, and there must be a minimum waiting period of one day between the issuance of shares. 

Key Considerations for Investors

SEIS allows investors to contribute a maximum of £200,000 per financial year, while under EIS, the investment limit expands to £1 million. It is important to note that investors are subject to certain restrictions to maintain the integrity of the schemes. Investors cannot hold more than a 30% ownership stake in the company. This limitation ensures that the investment remains aligned with the purpose of supporting early-stage or growth-oriented businesses. Furthermore, investors must not have any employment associations with the company, as this is closely regulated to prevent potential conflicts of interest.

Once the shares have been issued to the investors, they have the opportunity to become directors of the company. However, it is crucial to highlight that this transition should occur after the shares have been acquired. This sequential process helps ensure that investors maintain a fair and impartial perspective during the investment decision-making process. By allowing investors to become directors post-share acquisition, the schemes facilitate the potential for active involvement and contribution to the strategic direction of the company, further aligning the interests of the investor and the business. 

Seeking S/EIS Advance Assurance

Investors often seek reassurance that a company qualifies for SEIS or EIS funding before committing their investment. The most effective way to obtain this confirmation is by applying for Advanced Assurance from HMRC. This involves submitting comprehensive documentation, including details of the proposed investor, a well-developed business plan that encompasses financial forecasts, the most up-to-date accounts, a cover letter, and any other relevant information requested by HMRC.

Obtaining Advanced Assurance serves as tangible proof of a company’s eligibility for SEIS or EIS funding. It not only provides investors with the necessary confidence but also enhances the credibility and reputation of the business. By showcasing that the company has met the rigorous requirements and scrutiny of HMRC, it becomes more attractive to potential investors who may be more inclined to consider providing the desired funding.

To ensure a streamlined and efficient process, it is highly recommended to seek assistance from experienced accountants or professionals who are well-versed in handling the application for Advanced Assurance. Their expertise and knowledge of the requirements and expectations can help navigate the complexities and ensure that all necessary documentation and information are correctly submitted. With their guidance, businesses can increase their chances of obtaining Advanced Assurance promptly and smoothly, bolstering their prospects of attracting potential investors and securing the desired SEIS or EIS funding. 


SEIS and EIS offer substantial tax incentives to investors who support early-stage and established businesses, respectively. These incentives encourage investment in innovative ventures, fostering economic growth and job creation.

Understanding the eligibility criteria, tax benefits, and compliance requirements is crucial for both entrepreneurs and investors to harness the full potential of SEIS and EIS. By leveraging these schemes, businesses can secure the funding needed to expand, while investors can access tax relief and potential returns on their investments. Seeking professional advice and complying with the necessary regulations will help unlock the tax advantages and facilitate growth and innovation in the UK startup ecosystem.

At Seven Legal, our aim is to provide tailored legal services designed to support start-ups throughout their journey of building, growing, and scaling their businesses. Our team of experts can offer advice and comprehensive assistance in navigating the intricacies of SEIS and EIS, ensuring that your business meets the necessary criteria for eligibility.

If you are interested in learning more about how we can assist you, we invite you to explore our range of services and get in touch.