For many UK startups and small businesses, securing investment is one of the biggest challenges in the early stages of growth. The Enterprise Investment Scheme (EIS) or The Seed Enterprise Investment Scheme (SEIS) are two options that can help offer a solution to this challenge by attracting investors with generous tax reliefs.

If you’re a small business looking to raise capital, understanding and utilising EIS or SEIS, could make a significant impact on helping you secure the funding your business needs.

But what’s the difference between the two schemes?

What is SEIS?  

The Seed Enterprise Investment Scheme (SEIS) is a UK government initiative designed to encourage investment in very early-stage startups by offering significant tax incentives to investors to reduce their financial risk, and make the business a more attractive investment opportunity.

SEIS is designed for businesses that are under 3 years old, with a gross assets limit of £350,000 and under 25 employees. The scheme can offer investors 50% Income Tax Relief.

SEIS helps businesses attract funding that they might otherwise struggle to secure due to their early stage.  

What is EIS? 

The Enterprise Investment Scheme (EIS) is a similar UK government initiative designed to encourage investment, but for more established small businesses that are less than 7 years from 1^st commercial sale or 7 years from a previous ‘relevant investment’ with a higher gross asset limit of £15 million and under 250 employees. 

Many successful UK companies have benefited from EIS funding in their early stages, helping them scale and achieve market success.

We will now go through the EIS qualification criteria and application process.

Why Should Your Business Apply for EIS? 

1. It Can Help Make Your Business More Attractive to Investors 

Since EIS allows investors to claim back up to 30% of their investment in income tax relief, they are more likely to take a chance on your business. This can make fundraising easier and increases your chances of securing the capital you need. 

2. It Can Help You Raise More Money 

Your business can raise up to £12 million through EIS funding, with a maximum of £5 million investment in any 12 month period.  If you are a knowledge-intensive company (KIC) (e.g., a tech or biotech startup), you can raise up to £20 million. 

3. It Encourages Long-Term Investment 

EIS requires investors to hold shares for at least three years to qualify for full tax reliefs. This means you can secure long-term funding rather than dealing with short-term investors looking for a quick exit. 

4. There Are No Repayments Required 

Unlike bank loans, EIS funding doesn’t require repayments. Instead, investors receive equity (shares) in your business. This means you retain cash flow for growth instead of worrying about debt repayments. 

Will You Qualify for EIS? 

To qualify, your business must meet HMRC’s eligibility criteria: 

• Be UK-based and independent 

• Have fewer than 250 employees (or 500 for knowledge-intensive companies) 

• Have gross assets of less than £15 million before the investment 

• Engage in a qualifying trade (most sectors qualify, but property, banking, and legal services are excluded) 

• Use the funds for growth and development  
  

How to Apply for EIS 

Step 1: Check Eligibility 

Before applying, ensure that your business meets the EIS criteria. If you’re unsure, consider seeking advice from the team at Bracey’s. 

Step 2: Apply for Advance Assurance 

While not mandatory, Advance Assurance gives investors’ confidence that your company qualifies for EIS. You’ll need to provide: 

• A business plan
• Details of how the funds will be used 
• Information on potential investors  

Step 3: Secure Investment 

Once you receive Advance Assurance, you can start pitching to investors, using EIS as a key selling point. Highlight the tax benefits to make your business a more attractive opportunity. 

Step 4: Issue Shares and Submit a Compliance Statement 

After securing investment, you must issue shares and submit an EIS1 Compliance Statement to HMRC. If approved, HMRC will provide EIS3 certificates, which your investors need to claim tax relief.

Both EIS and SEIS are good funding options for businesses looking to attract investors and fuel growth if you need funding for expansion, operate in a high-growth industry and want to secure long-term investment without debt.

If you would like guidance on applying for SEIS or EIS Advance Assurance speak to the expert team at Bracey’s Accountants.