Guide

Seed Enterprise Investment Scheme (SEIS)

Raise up to £250,000 in seed capital with SEIS, offering investors 50% income tax relief.

UK-wide

The Seed Enterprise Investment Scheme (SEIS) offers the most generous tax reliefs to investors in the UK - 50% income tax relief plus CGT exemptions. It's designed specifically for very early-stage companies seeking seed capital to prove their business concept.

Who can use SEIS

Your company can use SEIS if it meets these requirements:

  • Company age: Less than 3 years since first commercial sale (increased from 2 years in April 2023)
  • Gross assets: £350,000 or less at time of share issue (increased from £200,000 in April 2023)
  • Employees: Fewer than 25 full-time equivalent
  • Maximum funding: £250,000 total lifetime (increased from £150,000 in April 2023)
  • UK permanent establishment: Must have a base in the UK
  • Independence: Cannot have been controlled by another company since incorporation

Qualifying trade requirement

Your company must conduct a qualifying trade on a commercial basis with a view to profit. Excluded activities (which cannot be more than 20% of your trade) include:

  • Coal or steel production
  • Farming or market gardening
  • Leasing activities
  • Legal or financial services
  • Property development
  • Running hotels, nursing homes, or care homes
  • Generation of electricity, heat, gas, or fuel
  • Banking, insurance, money-lending

Connected party restrictions

  • Investors cannot be employees of the company (unless also a director)
  • You cannot use SEIS if you've already received EIS or VCT investment - SEIS must come first
  • No reciprocal investment arrangements (subscribing to each other's share issues)

Tax reliefs for investors

SEIS offers investors the highest tax reliefs of any UK venture capital scheme:

Income tax relief

  • Rate: 50% on qualifying subscriptions (compared to 30% for EIS)
  • Annual limit: £200,000 per tax year (maximum relief of £100,000)
  • Example: A £50,000 investment gives the investor £25,000 income tax relief

Capital gains tax exemption

  • If held for at least 3 years, gains on SEIS shares are completely free from CGT
  • Investor must have received full income tax relief with none subsequently withdrawn
  • Exception: sales to spouse or civil partner within 3 years do not trigger CGT

CGT reinvestment relief

  • 50% of gains exempt from CGT when reinvested in SEIS shares
  • Annual limit: £100,000 (£50,000 worth of gains)
  • Must dispose of an asset and reinvest the gain in SEIS shares in the same tax year

Loss relief

  • Can offset losses against chargeable gains
  • Reduce cost of shares by income tax relief given when calculating loss

The application process

Step 1: Apply for advance assurance (recommended)

Submit an application to HMRC via their online form before issuing shares. While not mandatory, advance assurance gives investors confidence. Include:

  • Proposed fundraising amount
  • Business plan and financial forecasts
  • Latest accounts
  • Memorandum and articles of association
  • Register of members
  • Investor pitch materials

Advance assurance approval rate (2024-25): 85%

Step 2: Issue shares to investors

Once you have advance assurance (or choose to proceed without), issue shares. Notify HMRC of any changes since your application.

Step 3: Submit SEIS1 compliance statement

This statutory declaration confirms your company meets all qualifying conditions and will continue to do so for 3 years. Required before investors can claim relief.

Step 4: Issue SEIS3 certificates

After HMRC approves your SEIS1, issue SEIS3 certificates to each investor. They cannot claim tax relief without this certificate.

Timeline: Typically 3-4 months from advance assurance to investors claiming relief.

Compliance requirements

Your company must maintain qualifying conditions for at least 3 years after investment.

You must notify HMRC within 60 days if:

  • Investor ceases to be a qualifying investor
  • Raised money will not be employed as required (must be spent within 3 years)
  • Company ceases to be a qualifying company
  • Company or connected person provides value to investor
  • Any breach of scheme conditions

Clawback triggers

  • Selling shares within 3 years: Income tax relief wholly or partly withdrawn (except sales to spouse/partner)
  • Company ceasing to qualify: E.g., exceeds employee cap, loses qualifying trade status
  • Funds not employed within 3 years: Must be spent on qualifying business activities
  • Investor becoming employee: Without being a director

Penalties

  • £100+ penalties for failing to notify HMRC within 60 days
  • Additional penalties for fraudulent or negligent false information

SEIS before EIS: the graduation strategy

Many UK startups use SEIS as a stepping stone to EIS as they scale:

  1. Seed stage (0-3 years): Raise SEIS (up to £250k) with 50% tax relief for angel investors
  2. Growth stage (3-7 years): Graduate to EIS (up to £5m/year) with 30% tax relief from institutional investors
  3. Scale stage (7+ years): Access non-equity funding or further EIS rounds

Important: You cannot raise SEIS and EIS on the same day - EIS must be raised at least one day after SEIS.

Research shows that companies approaching the £250,000 SEIS cap are the strongest predictors of graduating to EIS. SEIS helps you acquire startup capital, prove product viability, and attract further investment.

Why SEIS is attractive

  • Higher tax relief: 50% vs 30% for EIS makes investment more compelling for angels
  • Smaller amounts: Up to £250k suits very early stage where larger raises aren't feasible
  • Faster decisions: Smaller companies mean less complex due diligence
  • Proof of concept: Demonstrates traction before larger EIS raise

  1. Check eligibility

    Verify company age (under 3 years), gross assets (under £350k), and employee count (under 25 FTE).

  2. Confirm you haven't received EIS or VCT

    SEIS must be your first venture capital scheme investment - you cannot use it after EIS/VCT.

  3. Apply for advance assurance

    Submit via HMRC online form. 85% approval rate gives investors confidence.

  4. Prepare investor materials

    Business plan, forecasts, and pitch deck demonstrating growth potential.

  5. Issue SEIS3 certificates after approval

    Investors cannot claim 50% relief without their certificate.

  6. Spend funds within 3 years

    Money raised must be deployed on qualifying business activities.

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