If your company’s been trading for less than 2 years, with less than £200,000 of assets, you may be able to attract investment of up to £150,000.
The Seed Enterprise Investment Scheme (SEIS) is designed to help your company raise money when it’s starting to trade. It does this by offering tax reliefs to individual investors who buy new shares in your company.
You can receive a maximum of £150,000 through SEIS investments on which your investors can claim relief. This:
- includes any other de minimis state aid received in the 3 years up to and including the date of the investment - any excess won’t qualify for SEIS
- will also count towards any limits for later investments through other venture capital schemes
There are various rules you must follow so that your investors can claim and keep SEIS tax reliefs relating to their shares.
Tax reliefs will be withheld, or withdrawn, from your investors if you don’t follow the rules for at least 3 years after the investment is made.
Who can apply
You can apply if your company:
- carries out a new qualifying trade
- is established in the UK
- isn’t trading on a recognised stock exchange at the time of the share issue, also known as an unquoted company
- has no arrangements to become a quoted company or a subsidiary of one at the time of the share issue
- has gross assets of no more than £200,000 at the time of the relevant share issue - this includes the group’s assets if your company has subsidiaries
- doesn’t control another company unless that company is a qualifying subsidiary
- isn’t a member of a partnership - any qualifying subsidiary can’t be either
- isn’t controlled by another company, acting with or without other people - this applies from the date your company is incorporated
You’ll also have to have fewer than 25 full-time equivalent employees at the time the shares are issued. If your company has any subsidiaries, this applies to the whole corporate group.
If you’ve received investment either through the Enterprise Investment Scheme (EIS) or from a venture capital trust, you won’t be able to use SEIS.
About the investment
Your company must issue shares that meet requirements which are the same as those for shares issued under EIS.
The money you raise from the investment must be spent within 3 years from share issue. It must be spent on the qualifying business activity it was raised for. This includes:
- a qualifying trade
- preparing to carry out a qualifying trade
- research and development that’s expected to lead to a qualifying trade
You can’t use the investment to buy shares, other than in a qualifying 90% subsidiary which uses that money for a qualifying business activity.
New qualifying trade
If your company is already carrying out a trade, it mustn’t have been carried out for more than 2 years by either:
- your company
- any other person who then transferred it to your company
Your company, or any qualifying subsidiary, mustn’t have carried on any other trade before you started the new trade.
Your company’s trade must be treated as a commercial business, with the aim of making profits. However, your trade won’t qualify if it consists wholly or substantially of an excluded activity.
Before raising your money
You can ask HM Revenue and Customs (HMRC) if your share issue is likely to qualify before you go ahead, this is called advance assurance.
How to apply
When you’ve issued your shares, whether or not you asked for advance assurance, you must complete Form SEIS1 and send it to HMRC. This is known as your compliance statement and is the first step in enabling your investors to make any claims to tax relief.
Your SEIS1 can’t be submitted until you’ve either:
- been trading for at least 4 months
- spent at least 70% of the amount raised by the relevant share issue
You must complete a separate application for each share issue.
What happens next
If HMRC agrees you meet the conditions, we’ll send you a form SEIS2 and forms SEIS3 to give to your investors. Your investors won’t be able to claim the tax relief until they receive their SEIS3 from you.
Where we decide the investment doesn’t meet SEIS requirements, you can review and appeal the decision.
You can find more information in the SEIS section of the HMRC Venture Capital Manual.