Two acronyms get mentioned in almost every early-stage funding conversation: SEIS and EIS. They get said in the same breath so often that it’s easy to assume they’re basically the same thing with a different name attached.
They’re not. And the difference matters, both for you as a founder and for the investors you’re asking to back you.
Here’s what each scheme actually does, who it’s for, and why getting the paperwork right matters more than most founders expect going in.
What SEIS and EIS actually are
Both schemes exist for the same underlying reason: investing in an early-stage company is genuinely risky, so the government offers tax relief to investors to make that risk more worth taking. More investment into young, unproven businesses is the intended outcome. The two schemes just apply to different stages of that risk.
SEIS (Seed Enterprise Investment Scheme) is aimed at the earliest, highest-risk stage. It’s designed for very young companies, with strict limits on how much a business can raise under the scheme and how long it can have been trading. In exchange for that early risk, investors get the most generous tax relief of the two schemes.
EIS (Enterprise Investment Scheme) picks up where SEIS leaves off. It’s aimed at slightly more established companies that are still early-stage and still genuinely risky, but have moved past the very first seed round. The relief available to investors is still significant, just less generous than SEIS, reflecting the (slightly) lower risk.
In practice, many startups raise under SEIS first, then move to EIS for a later round once they’ve grown past SEIS’s limits.
Why founders should care, not just investors
It’s tempting to think of SEIS and EIS as an investor’s problem, since the relief technically belongs to them, not the company. In reality, whether your business qualifies can shape the entire fundraising conversation.
Investors who understand these schemes will often ask about SEIS or EIS eligibility before they ask much else, because it directly affects their own return. A round that qualifies is, in practical terms, easier to raise than one that doesn’t, because you’re offering investors meaningful downside protection alongside the upside they’re already taking a chance on.
That means SEIS and EIS eligibility isn’t just paperwork to sort out after you’ve found investors. It’s often part of what makes investors say yes in the first place.
Where founders get caught out
The rules that determine whether a company qualifies are specific: what the business does, how it’s structured, how the money raised will be used, and several other conditions that need to be met both at the time of investment and for a period afterward.
Get any of these wrong, and the consequences aren’t small. Relief can be refused or clawed back retrospectively, which means an investor who believed they were protected suddenly isn’t, sometimes years after the money changed hands. That’s a difficult conversation to have with someone who backed you early.
This is why it’s worth applying for advance assurance from HMRC before you start raising, wherever possible. It’s a formal, if not legally binding, confirmation that your proposed investment is likely to qualify, and it’s one of the simplest ways to reassure investors that the relief they’re relying on is actually going to hold up.
Getting it right from the start
None of this needs to be complicated, but it does need to be done properly and early, not fixed retrospectively once a term sheet is already on the table.
In practice, that means understanding whether your company and your planned raise fit the rules before you start pitching, applying for advance assurance where it makes sense, and making sure the paperwork investors receive after they invest is correct and submitted on time. Each of these steps is straightforward on its own. Missed or rushed, any one of them can undermine the relief the whole raise was partly built around.
Final Thought
A quote from our Principal, Sunil Aggarwal:
“Investors don’t just back an idea, they back the structure around it. SEIS and EIS assurance is part of that structure.
Get it right early, and it becomes one less thing standing between a founder and the round they’re trying to close. Get it wrong, and it’s the kind of problem that surfaces at exactly the wrong moment, after the money’s already moved.”
If you’re planning a raise and want to know where you stand on SEIS or EIS before you start those conversations, that’s exactly the kind of groundwork we help founders get right.
Talk to us about your SEIS/EIS application and we’ll walk through what your raise needs to qualify, well before it’s in front of investors.
- Email: info@drs-tax.com
- Telephone: 020 8059 1891
- Or submit an enquiry via our Contact Us page