If you are raising your first round, SEIS and EIS are probably the most powerful tools you have for getting investors over the line. But the rules are fiddly and the paperwork is unforgiving. This guide explains what the two schemes are, how they differ, and the two points where founders most often come unstuck.
What SEIS and EIS Actually Are
Both are government schemes that reward people for investing in early-stage UK companies by giving them tax relief. SEIS is aimed at the very earliest-stage companies and gives investors 50% income tax relief on what they put in. EIS is for companies a little further along and gives 30%. Both also offer capital gains tax reliefs and loss relief, which together make backing a young company far less risky than it sounds.
The Key Differences
The two schemes sit at different stages of a company's life. In broad terms:
| SEIS | EIS | |
|---|---|---|
| Company stage | Earliest stage | Slightly later stage |
| Income tax relief | 50% | 30% |
| Raise limit | Lower | Much higher |
| Company age, asset and employee limits | Tighter | More generous |
What Advance Assurance Is, and Why Investors Expect It
Advance assurance is HMRC confirming in writing that, on the information given, an investment in your company is likely to qualify. It is not legally required, but in practice most angel investors, syndicates and platforms will not invest without seeing it, because it protects the tax relief they are counting on.
One catch trips up a lot of founders: HMRC will not accept an application without at least one named potential investor on file. No named investor, no application, so line this up before you start.
The Application, Step by Step
Confirm eligibility honestly first. Then pull together the documents HMRC wants:
- A business plan or pitch deck
- Three-year financial forecasts
- Your latest accounts, if you have any
- Your articles of association
- The named investor's details
Submit through HMRC's venture capital schemes portal. Expect at least one follow-up question, and answer it carefully, because there is no right of appeal if the assurance is refused. That is why the application has to be right first time.
Where Founders Come Unstuck
The same handful of problems account for most refusals and delays:
- No named investor.
- A trade on HMRC's excluded list.
- A business plan that does not clearly show the money is at genuine risk.
- Rushing the application and triggering avoidable questions.
Each of these is avoidable with the application prepared properly.
After the Raise, the Bit People Forget
Advance assurance is not the finish line. Once you have issued the shares, you have to file a compliance statement, SEIS1 or EIS1, before HMRC will authorise the certificates. Only then can you issue the SEIS3 or EIS3 certificates your investors need to actually claim their relief. Miss this and your investors cannot claim, however good the advance assurance was.
Raising on SEIS or EIS? We can handle it.
We handle SEIS and EIS advance assurance and compliance on a fixed fee, from the application through to your investors' certificates, with a qualified accountant on it from start to finish. Book a free call and we will tell you straight where you stand.
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This article is a general guide and not tax advice. SEIS and EIS eligibility and the relevant limits depend on your specific circumstances and can change, so always confirm the current rules with a qualified accountant or HMRC before you apply.