SEIS: What Every Early-Stage Company Needs to Know - and How We Can Help
Raising funding as an early-stage company is tough. You’re often pre-revenue, light on assets, and asking investors to back potential rather than performance. That’s exactly where the Seed Enterprise Investment Scheme (SEIS) can make a real difference.
SEIS is one of the most generous tax reliefs available to investors in the UK, and when used correctly, it can be a powerful tool for startups looking to raise their first external funding. However, the rules are detailed, technical, and closely monitored by HMRC. Getting it wrong can be costly.
In this article, we explain what SEIS is, why it’s so valuable for small companies, what HMRC expects, and how we support companies from advance assurance through to full compliance.
What is SEIS and Why Does It Matter?
SEIS is designed to encourage investment into very early-stage UK companies. To make that attractive, the scheme offers investors exceptionally generous tax reliefs, which in turn makes your company more appealing as an investment opportunity.
For qualifying investments, SEIS provides income tax relief of 50% of the amount invested, up to an annual investment limit of £200,000 per investor. That means an investor could reduce their income tax bill by up to £100,000 in a single tax year. Unused relief can also be carried back to the previous tax year, increasing flexibility.
From a company’s perspective, SEIS allows you to raise up to £250,000, provided all the conditions are met. For many startups, this funding can be the difference between an idea staying on paper and becoming a viable business.
Who Is SEIS Designed For?
SEIS is aimed squarely at small, early-stage companies that are genuinely at the beginning of their commercial journey. Broadly, the scheme applies to companies that:
Are unquoted, less than 3-years old and UK-based
Have fewer than 25 employees
Have gross assets of no more than £350,000 immediately before the share issue
Are raising funds to start or develop a new qualifying trade
Has not previously raised funds under EIS or VCT, is not controlled by another company, and does not control any non-qualifying subsidiaries.
The company must issue ordinary shares, and investors must hold less than 30% of the company after the investment to qualify for relief.
Key Company Conditions: What HMRC Looks At
To qualify for SEIS, a company must meet a number of conditions over specific time periods before and after the share issue. In practice, HMRC will focus on the following areas:
1. The Nature of the Trade
The company must exist wholly to carry on one or more new qualifying trades. Non-qualifying activities must not form a substantial part of the business, whether at company or group level.
2. How the Business Is Structured
The trade must be carried on by the company itself or by a qualifying subsidiary. Any subsidiaries must meet strict criteria, and certain structures - such as partnerships - are not permitted during the relevant period.
3. UK Presence
The company must have a permanent establishment in the UK throughout the relevant period.
4. Independence
The company must not be under the control of another company and must remain independent throughout the qualifying period.
5. Financial Position
At the start of the qualifying period, the company must meet HMRC’s “financial health” requirements and remain within the asset and employee limits.
6. Previous Fundraising
SEIS is intended for first-stage equity funding. Companies that have previously issued shares under EIS or VCT will not qualify.
These conditions are assessed not just at the point of investment, but across defined periods before and after the share issue - which is where many problems arise if advice isn’t taken early.
Why SEIS Is So Powerful for Small Companies
SEIS doesn’t just benefit investors - it directly supports growing businesses by:
Making your company far more attractive to angel investors
Reducing perceived investment risk through substantial tax relief
Allowing directors to invest personally (within limits)
Providing funding at a stage where traditional finance is often unavailable
For many startups, SEIS funding is the bridge between bootstrapping and scaling.
Advance Assurance: Why It’s So Important
Although advance assurance isn’t legally required, it is strongly recommended. Advance assurance is HMRC’s non-binding confirmation that your company appears to meet the SEIS conditions.
Investors frequently expect advance assurance before committing funds. Without it, fundraising can stall or fail altogether.
We help companies prepare and submit robust advance assurance applications, ensuring:
The company’s activities are clearly explained and correctly categorised
The share structure and investment terms meet SEIS requirements
HMRC queries are handled efficiently and professionally
Ongoing Compliance and HMRC Communication
SEIS doesn’t end once the money is raised. The company must continue to meet the qualifying conditions and submit the correct compliance statements before investors can claim their tax relief.
We support companies with:
SEIS compliance statements and certificates
Ongoing eligibility monitoring
Changes to business activities or structure
Direct communication with HMRC on technical or contentious points
Our role is to make sure there are no surprises - for you or your investors.
How We Can Help
SEIS is incredibly valuable, but it is also heavily scrutinised. Early advice can prevent costly mistakes and protect both the company and its investors.
We provide end-to-end SEIS support, including:
Eligibility assessments before fundraising
Advance assurance applications
SEIS and EIS planning (where a transition to EIS is expected)
Compliance filings and HMRC correspondence
If you’re planning to raise early-stage funding, or want reassurance that your SEIS position is secure - we’d be happy to help.
Get in touch:
📧 hello@surreyhillstax.co.uk
📞 01483 970 410