Is your company eligible for SEIS?

14 June 2022

SEIS is a fantastic way to increase your chances of finding investors when raising money.

advice : Fundraising and Tax

Seed Enterprise Investment Scheme (SEIS), alongside EIS, is a government-approved scheme designed to encourage investment in early-stage companies. It does it by offering tax reliefs to individual investors who buy new shares in your company. Find out if your company meets the conditions of EIS in our previous blog.

Eligible companies can receive a maximum of £150,000 through SEIS investments. This amount will include:

  • include any other de minimis state aid received in the 3 years up to and including the date of the investment; and
  • count towards any limits for later investments through other venture capital schemes.

There are rules for at least 3 years after the investment is made which you must follow so the investors can claim and keep SEIS tax reliefs. If, not, tax reliefs will be withheld or withdrawn from your investors.

Who is eligible for the SEIS scheme?

A company is eligible for the SEIS scheme if:

The company and any of its subsidiaries must also:

  • not have gross assets over £200,000 when the shares are issued;
  • not be a member of a partnership;
  • have less than 25 full-time equivalent employees in total when the shares are issued.

If you have previously received investment through the EIS or from a venture capital trust, then you cannot use this scheme.

About shares & investment

The shares you issue must be paid up in full, in cash, at the time when they’re issued. The company should have a way to accept payment before shares are issued.

Your shares for SEIS investments must be full-risk ordinary shares which:

  • are not redeemable;
  • carry no special rights to your assets.

The shares you issue can have limited preferential rights to dividends. However, the right to receive dividends cannot be allowed to accumulate or allow the dividend to be varied.

When you issue the shares there cannot be an arrangement:

  • to guarantee the investment or protect the investor from risk;
  • to sell the shares at the end of, or during the investment period;
  • to structure your activities to let an investor benefit in a way that’s not intended by the scheme;
  • for a reciprocal agreement where you invest back in an investor’s company to also gain tax relief;
  • to raise money for the purpose of tax avoidance – the investment must be for a genuine commercial reason.

The money you raise from the investment must be spent within 3 years of the share issue. You must spend the money on either:

  • qualifying trade;
  • preparing to carry out a qualifying trade;
  • research and development that’s expected to lead to a qualifying trade.

You cannot use the investment to buy shares unless those shares are in a qualifying 90% subsidiary that uses the money for qualifying business activity.

New qualifying trade

If your company is already carrying out a qualifying trade, then it must not have been carried out for more than 2 years by either:

  • your company;
  • any other person who then transferred it to your company.

The company or the qualifying subsidiary must not have carried out any other trade before you started the new trade.

Your company’s trade must be treated as a commercial business to make a profit. However, your trade will not qualify if it consists mostly of an excluded activity.

For more information regarding shares or investment please visit Gov.uk website.

Nothing on this page is intended to be or should be construed or taken as accountancy, investment, tax or any other kind of advice. We recommend individuals and companies seek professional advice on their circumstances and matters.