Step by step guide to SEIS and EIS tax relief for investors

It is established tax law that the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) provide generous tax savings for investors (see FAQ 1). In a nutshell, tax relief is available to investors at two stages - when they subscribe for the shares and again when they dispose of them.

The question we are asked most frequently is “how do I secure SEIS and EIS approval for my investors”? We set out the steps for you below:

Step 1- Is the trade eligible for SEIS and/or EIS tax relief?

Not every trade will qualify.  However, some trades may qualify depending on the nature of activities carried out.  The position can be tricky to navigate.  Take “fintech” for example.  The development of the software may be a qualifying trade, whereas banking and finance are not. There are de-minimis exceptions.

If you are not sure whether your trade qualifies, we can help assess the position and, where appropriate, approach HMRC where the position is unclear. See below for details of the advance assurance service.

Step 2 – Does the company qualify for SEIS and/or EIS?

The rules differ slightly between SEIS and EIS.

For SEIS, the Company must:

• Have been trading for less than 3 years
• Employ fewer than 25 people
• Have no more than £350,000 in gross assets
• Meet the UK establishment and risk-to-capital requirements

For EIS, for shares issued from 6 April 2026, the Company must:

• Have been trading for less than 7 years
• Employ fewer than 250 people
• Have no more than £30 million in gross assets immediately before the share issue and £35 million immediately afterwards
• Cannot be a subsidiary of another company where that other company holds more than 50% of the shares in the company
• Not raise more than £10 million in total over a 1-year period.

Step 3- Advance assurance service offered by HMRC.

Advance assurance is confirmation from HMRC that an investment in the business is likely to qualify for SEIS and/or EIS tax relief. HMRC advance assurance provides comfort for investors and may make it easier to attract investment. It is not compulsory, but we would recommend it and most of our clients take this step.

We can help you with the advance assurance application and review the supporting documents before submission to HMRC.  HMRC will consider:

• A business plan with detailed financial forecasts. The business plan should be persuasive, while also explaining how the investment will meet and overcome the “risk to capital” condition.
• The latest set of company accounts.
• The Company’s Articles, the Shareholders’ Agreement, any Investment Agreement.
• Details of previous investments and or grants.
• The Register of Members and Share capital table outlining any dilution to be suffered upon investment. We can help prepare these technical documents.
• Whether you are seeking SEIS and/or EIS advance assurance

HMRC have also produced a SEIS “Advance Assurance Checklist” to help ensure important information is included in the application.

Step 4- Issue the SEIS and/or EIS shares to investors.

Once HMRC has granted your company HMRC advance assurance, if you have applied for it, you can issue your S/EIS shares. You can also issue your S/EIS shares without obtaining advance assurance. The shares must have been paid for in full by your investors before they are issued. We often see businesses trip up on the timing.

The shares must also meet certain conditions to qualify. They must be:

• Ordinary, non-redeemable shares.
• Free from preferential rights to assets on a winding up and restrictions on income rights.

You cannot raise more than £250,000 through SEIS, although you can secure additional later funding through EIS (see FAQ 4 below).

Step 5- Report the issue of new shares to be used for SEIS and/or EIS to Companies House

Once you’ve issued your S/EIS shares, you will need to report the issue of shares to Companies House and update the PSC information where appropriate (see FAQ 6).

Step 6 – Issue share certificates to investors

Your investors will need SEIS and/or EIS share certificates to claim their tax relief. The process is broadly as follows:

• Complete the SEIS1 or EIS1 compliance statement and submit it to HMRC.
• HMRC will issue SEIS2 or EIS2 authorisation, together with a Unique Investment Reference.
• Use the authorisation number and other required information to complete the SEIS3 or EIS3 compliance certificate for each investor.

Once your investors have received their certificates, the process is complete!

Frequently Asked Questions (FAQs)

1: What tax relief is available for investors?

SEIS

Once you have received your shares, you can claim Income Tax relief on the tax year you make the investment or the tax year before you make the investment (if you choose to treat some or all of the investment as being made in a previous year). You can invest up to £200,000 per year in SEIS-eligible companies each tax year, and claim up to 50% of this back through Income Tax relief.

When you sell your shares, you will generally pay no Capital Gains Tax on any profits. As long as:

• You held the shares for a minimum of three years.
• You received Income Tax relief on that investment which has not been reduced or withdrawn at a later date.

Furthermore, if you sell an asset and use all or part of the gain to invest in a qualifying SEIS company, you may reduce your initial CGT liability by up to 50%.

EIS

Under EIS, you can invest up to £1 million in EIS-eligible companies, or up too £2 million where at least £1 million is invested in knowledge-intensive companies, and claim up to 30% of this back through Income Tax relief.

As with SEIS, when you sell your EIS shares you will generally pay no CGT on the profits (as long as you follow the same conditions).

If you sell your EIS shares at a loss, you can choose to set the loss, after taking account of any Income Tax relief received, against your income.

You may also be able to defer CGT on gains by investing in a company that qualifies for EIS.

2: What is a qualifying trade?

The money raised by an S/EIS share issue must be used for a qualifying trade. One problem our clients often encounter is that new business models and technologies do not always fit neatly within the list of excluded activities.

Most Companies will be regarded as carrying on a qualifying activity for S/EIS purposes if:

• The trade is conducted with a view to a profit; and
• It does not, to a substantial extent, involve excluded activities.

If you consider your trade might be in a grey area, you can apply to HMRC for advance assurance. There is no charge for the service.

3: Can I invest in my company if I am also a director?

It is often the case that the founders of a Company want to invest as directors. However, there are certain rules to be met to secure SEIS/EIS tax relief.

SEIS

Employees cannot generally benefit from SEIS, although directors can qualify in certain circumstances. Unlike EIS, a director can be paid and still qualify for SEIS, subject to the other conditions.

EIS

Under the EIS rules, directors can qualify if they are unpaid or if they are paid they meet the Business Angel requirements. The director must generally be appointed after making the investment.

It may be useful to have these points covered by a director’s service agreement. This allows the Company to outline the position clearly, and for the director to know how he can benefit from EIS before he joins the Company.

4: What if I want EIS and not SEIS?

While EIS grants your Company access to greater funding opportunities, we would suggest considering SEIS first where the company qualifies. This is because SEIS relief is not generally available for shares issued after EIS shares in the same company.

Raising money through SEIS can help get your Company off the ground and, if successful, further funding may then be available through EIS.

5. How to issue shares

When issuing your shares, you will need to complete SH01, and file it at Companies House. You will also need to update your companies Register of Members to show the new shareholders and their respective shareholdings.

The issued shares must be ordinary and non-redeemable and must meet the relevant restrictions on preferential rights. If they do, your investors will lose their relief.

6. When do I need to file a PSC

Depending on the number of shares and percentage held by an individual investor, , the Company might need to update its register of Persons with Significant Control (PSC). Any changes that result in a change to the PSC information must be notified to Companies House. The PSC register should be updated 14 days after the changes to the PSC register are confirmed.

For both SEIS and EIS, an investor cannot hold more than a 30% stake in the company. However, holding 25% or more of the shares or voting rights may result in a PSC registration requirement.

7. Protecting your trade

Having achieved your SEIS and/or EIS investment, your investors are likely to want to see the trade protected as far as is practical. We can help you tailor the appropriate agreements to fit your circumstances.

We assist you with the following protections:

• IP protection - if the company owns any intellectual property, we can assist with registering trade marks and protecting other IP rights.
• Commercial agreements- investors may want Shareholders' or Investment Agreements setting out the rights attached to their shareholding. They may also seek veto rights over certain decisions to protect their investment. We can help draft these agreements.
• Bespoke articles- most companies are incorporated with the model articles. These do not contain any of the essential commercial provisions that our clients want. We can assist with drafting bespoke articles to reflect the company's specific requirements and protect its interests.