SEIS and EIS Explained: Attracting UK Investors with Tax Relief

Raising early-stage capital can be challenging—but in the UK, the government offers powerful tax incentives to encourage investment in startups and growing companies.

The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) provide generous tax reliefs to individuals who invest in qualifying businesses. This article explains what SEIS and EIS are, how they benefit both companies and investors, and how Dragonfly Associates supports applications and structuring—subject to agreement.

What Are SEIS and EIS?

SEIS and EIS are government-backed schemes designed to encourage private investment in high-risk businesses:

• SEIS: Supports early-stage businesses (typically less than 2 years old), with investments up to £250,000.
• EIS: Supports more established growth companies, allowing investments up to £5 million per year.

Investors who put money into a qualifying SEIS or EIS company can claim generous tax reliefs against their income tax and capital gains.

What Are the Benefits to Investors?

If your company qualifies, investors can access:

SEIS (Seed Enterprise Investment Scheme):

• 50% income tax relief (on up to £100,000 per year)
• 100% capital gains tax exemption on sale (after 3 years)
• Loss relief if the business fails
• Capital gains reinvestment relief

EIS (Enterprise Investment Scheme):

• 30% income tax relief (on up to £1 million per year)
• Capital gains tax deferral
• Inheritance tax relief (after 2 years)
• Loss relief

These incentives can significantly increase the attractiveness of your company to UK-based angel investors and funds.

Company Eligibility: Can You Qualify?

SEIS and EIS eligibility depends on your company’s:

• Age (SEIS: under 2 years, EIS: under 7 years typically)
• Size (fewer than 25 full-time employees for SEIS, 250 for EIS)
• Gross assets (less than £200,000 for SEIS, £15 million for EIS)
• Business activity (must not fall under excluded sectors)
• UK permanent establishment

The company must also have a genuine intention to grow and develop over time.

Investor Conditions

To claim the tax reliefs, investors must:

• Be UK taxpayers
• Hold the shares for at least 3 years
• Not be connected to the company (e.g. not an employee or controlling shareholder)

Shares must be new ordinary shares, issued for cash and paid in full.

How to Apply: SEIS/EIS Advance Assurance

Before raising funds, many companies seek “advance assurance” from HMRC. This is a non-binding confirmation that your business appears to qualify.

Steps include:

• Preparing a detailed application
• Submitting a business plan, financial forecasts, cap table, and proposed investment terms
• Waiting 4–6 weeks for HMRC feedback

Dragonfly Associates supports clients with advance assurance applications, investor communications, and final SEIS/EIS compliance filings—subject to agreement.

SEIS First, Then EIS

It’s common to raise a smaller amount under SEIS (e.g. friends and family, angels), then follow with a larger round under EIS.

We help structure the share rounds and ensure they are properly spaced and documented so as not to invalidate SEIS eligibility.

Frequently Asked Questions

Can non-UK companies qualify for SEIS/EIS?

No. The company must have a UK permanent establishment and meet all UK incorporation and control requirements.

Can I use both SEIS and EIS?

Yes. You can raise up to £250,000 under SEIS and then continue raising under EIS, provided the conditions are met.

Do I need to use a lawyer or accountant?

It’s strongly recommended. SEIS and EIS applications require careful planning and professional documentation. We offer assistance as part of our startup support services.

Make Your Startup Investment-Ready

SEIS and EIS aren’t just tax schemes—they’re powerful fundraising tools. If your company qualifies, they can open doors to serious investors looking for tax-efficient opportunities.

Dragonfly Associates helps you assess eligibility, secure advance assurance, and structure your share issues to support long-term compliance—available under clearly defined agreements.

To attract investors with confidence and stay legally compliant, contact us to begin your SEIS/EIS journey.