This is the condition that catches pivoted companies, and it catches them late. SEIS is not just restricted to companies trading for less than three years. The company must not have carried on any other trade before it started the one it is raising against. For a company that did something else first, that is usually fatal to SEIS, and founders often find out only when the application comes back.
The rule in one line. For SEIS, the company or any qualifying subsidiary must not have carried out any other trade before starting the new one, and the new trade must not have been carried on for more than three years, counting any predecessor.
The Two Separate Tests
People tend to remember the three year limit and forget the prior trade rule, but they are different conditions and you have to pass both.
| Test | What it requires | Who it catches |
|---|---|---|
| Age of the trade | The qualifying trade must not have been carried on for more than three years, by the company or any predecessor | Companies that have been going a while before raising |
| No previous trade | The company must not have carried out any other trade before it started the new one | Companies that pivoted, and companies that did consultancy or contracting first |
| Gross assets | Not more than £350,000 when the shares are issued | Companies that raised elsewhere first |
| Employees | Fewer than 25 full-time equivalents when the shares are issued | Companies that scaled before raising under SEIS |
The three year clock also counts a predecessor. If the trade was carried on somewhere else first and moved into this company, the clock did not restart when the company was incorporated. Incorporating a trade that had been running as a sole trade does not buy you three fresh years.
The Situations That Catch People
The pivot
The classic case. The company was set up to do one thing, traded doing it, then changed direction to the thing it is now raising against. The new trade may be three months old and perfectly qualifying in itself, but the company has carried on another trade before it, so SEIS is not available. This is the version founders find hardest to accept, because from their point of view the real business started at the pivot.
Consultancy or contracting first
Very common with technical founders. The company was incorporated to invoice for the founder's consultancy while the product was being built, then the product became the business. That consultancy was a trade. It counts.
An old dormant company reused
Reaching for a company you already own because it saves an incorporation is a false economy if that company ever traded. A company that has genuinely never traded is fine. One that traded and then went dormant is not.
The trade moved in from elsewhere
Where the trade was previously carried on by a founder personally, by a partnership, or by another company, that is a predecessor and its time counts towards the three years.
What does not count. Preparing to trade is not trading. A company that spent eighteen months building a product, with no sales and no other activity, has not started the clock and has not carried on a previous trade. The three years run from when the qualifying trade actually began, not from incorporation.
EIS Is More Forgiving
If SEIS is closed to you, EIS often is not. EIS has no equivalent bar on having carried on a previous trade. Its timing test is different: the shares generally have to be issued within seven years of the company's first commercial sale, with longer allowed for knowledge-intensive companies.
So a company that pivoted two years in, and has lost SEIS as a result, will frequently still qualify for EIS. That is a smaller headline rate for investors, 30% income tax relief rather than 50%, but it is a live raise rather than a dead one. Our guide to SEIS vs EIS sets out how the two compare, and the EIS checklist covers the rest of the conditions.
What To Do If This Is You
- Establish when the new trade actually started, and whether what came before it was a trade or preparation to trade. The distinction decides everything and it is a question of fact, not of what the accounts were labelled.
- Check for a predecessor. If the trade existed before this company held it, the clock started then.
- Look at EIS properly before giving up on the raise. In most pivot cases this is the answer.
- Do not incorporate a new company and move the trade across to reset the clock. Predecessor rules exist precisely to prevent this, and an arrangement whose purpose is to get round the conditions creates a much bigger problem than losing SEIS.
- Get it checked before you apply, not after. A refusal is on record and there is no right of appeal against it.
Common Questions
Yes. For SEIS the company, or any qualifying subsidiary, must not have carried out any other trade before it started the new qualifying trade. This is separate from the three year limit on the age of the trade, and it is the condition that most often catches companies that have pivoted.
Usually not, if it genuinely traded doing the first thing. The new trade may be recent and perfectly qualifying, but the company has carried on another trade before it, which fails the condition. EIS has no equivalent bar and is often available instead.
Yes, if it was genuinely a trade. Invoicing for the founder's consultancy while building a product is very common and it does count, which closes SEIS off. Preparing to trade is different: a company building a product with no sales and no other activity has not started trading.
No, it runs from when the qualifying trade began, and it counts any predecessor. Incorporating a trade that was previously carried on as a sole trade or in another company does not restart the clock, because that earlier activity is a predecessor trade.
No. The predecessor rules count time the trade was carried on before it moved into the company, so moving it across does not restart anything. An arrangement designed to get around the conditions also risks being treated as a disqualifying arrangement, which is a far worse outcome than losing SEIS.
Often yes. EIS does not bar companies that carried on a previous trade. Its timing test is that shares generally have to be issued within seven years of the company's first commercial sale, longer for knowledge-intensive companies. Investors get 30% income tax relief rather than 50%.
Not sure whether your company still qualifies for SEIS?
We handle SEIS and EIS advance assurance and compliance on a fixed fee, and the eligibility conversation comes first. If a previous trade has closed SEIS off, we will tell you before you spend anything, and look at whether EIS works instead.
Book a free callChecked against HMRC guidance on gov.uk on 21 September 2026. Whether an activity amounted to a trade, and when it began, is a question of fact about your own company. This is general information and not advice on your own position.