The Essential Guide to EIS & SEIS Investments

EIS and SEIS are two of the most beneficial tax incentive schemes for angel investors and venture capitalists in the UK. Entrepreneurs and startups founders need to know about the EIS and SEIS scheme as the tax incentives associated with it significantly influence the investor’s decision to invest in your company. These two schemes launched by the UK Government allow investors and venture capitalists to redeem a sizable portion of their investment through income tax. We compiled a simple guide to some essential information about EIS and SEIS investment schemes.

Enterprise Investments Scheme and Seed Enterprise Investments scheme are two tax incentive schemes launched by the UK Government to inspire investments in qualifying startups and early-stage companies in the UK. This guide is meant for Entrepreneurs and Individual investors to give them a comprehensive understanding of

  • the EIS and SEIS schemes, 
  • how it works, 
  • their eligibility criteria, 
  • the SEIS and EIS application process,
  • and How investors and entrepreneurs can benefit from this SEIS and EIS

What Is an Enterprise Investment Scheme And Seed Enterprise Investment Scheme? - an Overview

The EIS and SEIS schemes provide an excellent opportunity to close entrepreneurs’ funding gaps when raising funds for business setup, expansion, and growth. It offers EIS tax relief and SEIS tax relief to investors and fund managers willing to invest in companies based in the UK. SEIS and EIS reliefs associated with these two schemes incentivize and motivate angel and individual investors to invest in high-risk businesses. Therefore EIS and SEIS are two essential schemes meant to promote the entrepreneurial environment in the UK. 

Even with their high potential, both EIS and SEIS are highly underrated. It provides significant growth opportunities to early-stage companies and startups to meet their funding requirements. Moreover, EIS funding and SEIS tax relief make high-risk businesses appealing to investors.

What Are the Key Differences Between the Two Schemes?

While both these schemes are relatively similar, there are considerable differences between them regarding their focus areas, entrepreneurs’ eligibility criteria, and tax incentives for investors. 

What Does EIS Stand For?

Do you wonder what the EIS means? EIS is essentially focused on small to mid-sized startups to expand their business beyond their current potential. Under the EIS scheme, individual investors are eligible for an investment amount of up to £1M Per year as per the UK Govt’s official website. In addition, they get a 30% tax relief against the amount invested. The maximum amount invested in an EIS company is £12M throughout the company’s lifetime, and in case the company is a “knowledge-intensive” company, the maximum amount invested is £20M. Knowledge-intensive companies are typically companies with high research and development processes and costs. 

EIS vs SEISWhat Is SEIS And How Is It Different?

The critical difference between EIS and SEIS is that SEIS is catered towards very early-stage startups. While the maximum investment amount can be $150,000, investors can avail of up to 50% tax relief on their investment. They also get a tax relief of up to $100,000 per year with a tax exemption on capital gains tax when the shares are sold after three years. 

The Key Differences


  • Tax exemption of up to 50% against the invested amount under the SEIS investment scheme
  • Investors avail of Capital Gains Tax Exemption if they sell their shares post three years of holding them
  • A 50% CGT write-off on the invested amount per tax year
  • Investors can get an Inheritance Tax exemption on shares if they are held for two years
  • In instances where the shares are sold at a loss, investors can redeem them against the CGT or income tax


  • Similar to SEIS, investors get a Capital Gains Tax Exemption on the sale of their shares after three years of holding them under the EIS tax relief scheme.
  • Shares are Inheritance tax-free if they are held for two years.
  • When shares are sold at a loss, they are redeemed against the CGT or income tax.

How Can Startups Benefit from EIS And SEIS?

It is paramount that entrepreneurs remain aware of the funding options available to help expand and grow their businesses. Generally, many entrepreneurs remain oblivious to UK investors’ significant equity investment opportunities under the EIS and SEIS scheme. Funding under these schemes makes such companies highly appealing to potential investors and several other benefits for the company. They include:

  • EIS and SEIS schemes generally encourage investors to invest their funds into high-risk businesses. As such, it’s an excellent opportunity for businesses struggling to raise capital to benefit from this scheme. In addition, investors get incentivized to invest in your company if they qualify for the two schemes. 
  • Small companies and startups can learn significant lessons from experts in the field. Investors are often keen on mentoring such companies as it is in their best interest to perform well. Furthermore, EIS funding promotes better relationships with experienced investors and entrepreneurs, opening the door for a mentoring opportunity with fund managers and angel investors. 
  • Generally, debt financing is a precarious funding option for entrepreneurs. However, since EIS and SEIS investments are not debt finance, entrepreneurs do not have to be overly concerned about repayment or interest considerations. Investors get paid whenever the company makes a profit, distributes dividends, or has an IPO.

How Can Businesses Become Qualified for EIS and SEIS?

Most startups qualify for SEIS and  EIS applications. Still, specific trades are excluded, such as traders dealing in land, commodities, or traders involved with banking or insurance companies. The EIS and SEIS schemes also exclude traders that provide legal or accounting services, property development, and the export of electricity.

Additionally, below mentioned are some of the requirements businesses must comply with to become eligible for EIS and SEIS schemes:

  • Businesses looking to secure a SEIS investment should have no more than 25 employees. Whereas businesses under EIS investment should have less than 250 employees
  • For companies to be eligible for SEIS investment, their trading period should not exceed two years. For EIS investment, the trading period should be less than seven years. 
  • Companies that raise funds under EIS and SEIS do not have to be UK-based companies exclusively. A foreign company with a permanent establishment in the UK is also eligible, but they should conduct a significant part of their trade in the UK. 
  • Furthermore, companies applying for EIS and SEIS investment schemes should not be partners with another company. 

Besides the points mentioned above, companies also need to meet the eligibility criteria set by the UK government. To confirm the eligibility criteria for EIS and SEIS schemes, companies can visit the HMRC web page for a detailed list of the excluded trades. 

 Next, companies looking to secure investments under EIS and SEIS will need SEIS Advance Assurance. It helps investors know that your business is eligible for EIS and SEIS investment. 

Advance Assurance and How to Apply For It?

Advance Assurance enables companies to obtain a provisional confirmation from HMRC that the investment meets investors’ EIS and SEIS scheme requirements. This process helps potential investors understand if your company qualifies for possible tax reliefs under the two schemes. Therefore, entrepreneurs should apply for Advance Assurance to HMRC EIS & SEIS respectively before starting the funding rounds. For most applications, you can follow the information below:

  • Incorporation documents including certificate of incorporation, memorandum, and articles of association 
  • Unique Tax Reference
  • Company details as per Companies House
  • Copy of the latest accounts depending on their availability
  • A detailed business plan and financial predictions 
  • Explanation of how you meet the risk to capital condition 
  • Subscription or shareholder agreement if there is any available 
  • Draft of any documents used to explain your proposal to potential investors
  • The previously used list of the amounts, dates, and Venture Capital schemes to secure investments 
  • SEIS Advance Assurance application 
  • A completed checklist for the EIS form & SEIS form
  • Any other supporting documents to prove your qualification for the scheme

Email the application and supporting documents to Please visit the official HMRC website for more information on the application process.

HMRC replies within 45 days of applying. However, it will take up to 2-3 weeks for HMRC to approve your application, provided that the application is correctly filed with no further questions or clarity required from the HMRC. Should HMRC seek any further clarifications, the application approval is delayed. 

How to Find EIS and SEIS Investors?

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After applying for and obtaining Advance Insurance, startups and entrepreneurs can confidently promote their companies to early-stage angel investors, many of whom actively invest in SEIS and EIS eligible companies. Furthermore, gaining Advance Assurance from HMRC will increase investor confidence as they can be sure of receiving tax reliefs. Therefore, entrepreneurs who run high-risk businesses have an excellent opportunity to receive investments under the EIS and SEIS scheme.

Essential Aspects to Consider Before Applying

While EIS and SEIS are undoubtedly hugely beneficial for high-risk startups and businesses, entrepreneurs should understand that EIS and SEIS can fail for one or several reasons because of the extensively drafted anti-avoidance rules. Therefore, businesses must have a clearly defined and detailed pre-clearance following the rules set by HMRC.

HMRC now requires companies to send a detailed list of investors, which can be challenging as they need the HMRC clearance to secure them. Conversely, they need the investor details to secure the funding. Misjudging or taking for granted seemingly simple steps has catastrophic consequences for the qualifying process of the company.

It is shockingly easy to fall short of rules set by HMRC. For example, there are high chances of flouting rules such as fully paid shares, preferential rights in multiple share classes, and more. As a best practice, you should work with an experienced professional to help you avoid any pitfalls during the application process.

Are you looking for creative and effective ways to present your business to investors? We gathered our top insight on how to present your business idea.