Raising investment for a science or technology business can be difficult. Developing products, employing specialists and moving an idea towards commercialisation often requires substantial capital.
The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) can make a funding round more attractive to private investors. These government-backed venture capital schemes offer qualifying individuals tax relief when they invest in higher-risk, early-stage companies.
The business does not receive the tax relief itself. Instead, SEIS and EIS can encourage investment by reducing some of the financial risk faced by investors.
This guide explains the key differences, the rules applying in 2026/27 and what founders should consider before issuing shares.
What are SEIS and EIS?
SEIS and EIS provide tax incentives to individuals who subscribe for new shares in qualifying, unquoted businesses. The company, its trade, the investor and the investment must all satisfy detailed conditions, generally throughout a three-year qualifying period.
The shares must normally be paid for in cash, fully paid up when issued and structured as full-risk ordinary shares. There cannot be arrangements that guarantee the investment, protect investors from normal commercial risk or provide an agreed exit.
Is SEIS suitable for your business?
The Seed Enterprise Investment Scheme is aimed at very early-stage companies. It can be particularly relevant to science and tech businesses developing an innovative product, platform or process.
A company can raise a maximum of £250,000 through SEIS during its lifetime. At the time the shares are issued, the company and any subsidiaries must generally:
- Have no more than £350,000 in gross assets.
- Have fewer than 25 full-time equivalent employees.
- Be carrying on, or preparing to carry on, a new qualifying trade.
- Have traded for no more than three years.
- Be established in the UK and not quoted on a recognised stock exchange.
- Not already have received EIS or Venture Capital Trust investment.
Most trades qualify, including research and development intended to lead to a qualifying trade. However, excluded activities include property development, certain financial services, leasing and some energy-related activities. Calling a company innovative does not automatically make it eligible.
SEIS funds must be spent within three years of the share issue on a qualifying trade, preparing to trade, or research and development expected to lead to a qualifying trade. They cannot generally be used to buy shares in another company, except in limited circumstances involving a qualifying 90% subsidiary.
If you are unsure whether SEIS is the right option for your business, our specialist team at Edwards can review your eligibility before you begin fundraising.
When might EIS be more appropriate?
The Enterprise Investment Scheme is generally aimed at slightly more established businesses that need more capital to grow. It can support follow-on rounds after SEIS, provided SEIS shares are issued first and all conditions are met. Once a company has issued EIS shares, it cannot subsequently issue shares under SEIS.
There were important changes on 6 April 2026. For most qualifying companies, the EIS annual funding limit is now £10 million and the lifetime limit is £24 million. At the time of investment, most eligible companies must have:
- Fewer than 250 full-time equivalent employees.
- Gross assets of no more than £30 million before the share issue and £35 million immediately afterwards.
- A permanent establishment in the UK.
- A qualifying trade.
- Made their first commercial sale no more than seven years earlier, unless an exception applies.
EIS funding must normally be spent within two years of the investment, or the start of trading if later. It must support a qualifying business activity, help grow or develop the company and remain genuinely at risk.
What are the rules for knowledge-intensive companies?
Some science and tech businesses may qualify as knowledge-intensive companies because they carry out significant research, development or innovation.
From 6 April 2026, most knowledge-intensive companies can raise EIS funds up to £20 million in a 12-month period and £40 million over their lifetime. They may have fewer than 500 employees and can generally receive initial qualifying investment within ten years of their first commercial sale or annual turnover first exceeding £200,000.
The definition is technical. Specific research expenditure and innovation or skilled-employee conditions apply. Carrying out some R&D is not enough.
What can SEIS and EIS investment be spent on?
The money must be used for qualifying business activities and must support the growth and development of the company. EIS funding generally needs to be used within two years of the investment, or the start of trading if later. Separate timescales and conditions apply to SEIS, so the planned use of funds should be reviewed before the shares are issued.
Do you need advance assurance?
Advance assurance is not compulsory, but many potential investors expect it before committing to a funding round.
It asks HMRC whether the proposed investment is likely to meet certain conditions. It is not an endorsement, performance guarantee or confirmation that each investor qualifies.
HMRC will usually require details of prospective investors, a business plan, financial forecasts, the amount being raised, the proposed use of funds, the company’s articles and an explanation of the risk-to-capital position.
Advance assurance should be considered before shares are issued. Any material changes to the proposal must be disclosed.
If you are considering applying for advance assurance, Edwards can help you prepare the submission and ensure your business plan and financial forecasts are in the best possible shape. Contact us to discuss your requirements.
What happens after the shares are issued?
The company must submit a compliance statement to HMRC after issuing the shares.
For SEIS, form SEIS1 can generally be submitted once the company has carried on the new qualifying trade for at least four months or spent at least 70% of the funds raised. For EIS, form EIS1 can generally be submitted once the qualifying business activity has been carried on for four months.
If HMRC accepts the statement, it authorises the company to issue SEIS3 or EIS3 compliance certificates with a unique investment reference number. Investors need the certificate to claim tax relief.
The company must continue to satisfy the rules throughout the qualifying period. Changes to its trade, group structure, share rights or use of funds can put investor relief at risk.
What tax relief can SEIS and EIS investors receive?
Qualifying SEIS investors can generally claim Income Tax relief equal to 50% of their investment, while qualifying EIS investors can generally claim relief at 30%. Additional Capital Gains Tax and loss reliefs may be available, depending on the investor’s circumstances and whether all scheme conditions are maintained.
Provided the conditions are met and the shares are held for at least three years, gains made when qualifying SEIS or EIS shares are sold can be exempt from Capital Gains Tax. SEIS may also provide reinvestment relief on 50% of a qualifying gain reinvested in SEIS shares, subject to the relevant limits. EIS investors may instead be able to defer Capital Gains Tax on gains from other assets when those gains are reinvested in qualifying EIS shares. Loss relief may also be available under either scheme if the investment performs badly.
The reliefs do not make the investment risk-free. Investors still need to undertake their own due diligence.
Plan before you raise investment
The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) can make a real difference when raising investment, but they should be considered before shares are issued, not added as an afterthought.
A credible business plan, realistic financial forecasts and a clear use-of-funds explanation can strengthen the advance assurance application and investor proposition. Check the share rights, funding sequence and impact of planned structural changes.
At Edwards Chartered Accountants, we help early-stage science and tech businesses assess whether SEIS or EIS may be suitable, prepare advance assurance applications and complete the compliance statements required for investors to claim tax relief.
If you are preparing to raise funding, speak to our specialist team in Walsall before agreeing the structure or issuing shares. Getting the details right at the outset can prevent delays, protect investor confidence and give your business a stronger foundation for growth.
Frequently Asked Questions
What is the Enterprise Investment Scheme (EIS)?
The Enterprise Investment Scheme is a UK government initiative that offers tax incentives to individuals who invest in qualifying, unquoted companies. EIS investors can claim Income Tax relief of 30% on investments of up to £1 million per tax year, with the limit increasing to £2 million provided any amount above £1 million is invested in one or more knowledge-intensive companies. Gains on qualifying shares held for at least three years can be exempt from Capital Gains Tax, provided EIS Income Tax relief has been claimed and not withdrawn. If qualifying shares are disposed of at a loss, loss relief may also be available. The scheme is designed to help earlier-stage businesses raise the growth capital they need by making investment more attractive to individuals.
What is the Seed Enterprise Investment Scheme (SEIS)?
SEIS is designed for very early-stage companies and offers more generous tax incentives than EIS. Investors can claim Income Tax relief of 50% on investments of up to £200,000 per tax year. A company can raise a maximum of £250,000 through SEIS in total. SEIS is particularly relevant for pre-revenue businesses carrying on, or preparing to carry on, a new qualifying trade. Research and development intended to lead to a qualifying trade can also be eligible.
What is the difference between EIS and SEIS?
SEIS targets very early-stage companies with gross assets of no more than £350,000 and fewer than 25 full-time equivalent employees. EIS is available to larger and more established businesses. For most companies, the EIS gross asset limit is £30 million immediately before the share issue and £35 million immediately afterwards, with fewer than 250 full-time equivalent employees. Higher employee limits apply to qualifying knowledge-intensive companies. The Income Tax relief rates also differ: 50% for SEIS investors and 30% for EIS investors. The maximum a company can raise also differs significantly: £250,000 over its lifetime through SEIS versus much larger investment limits under EIS. It is possible to use SEIS first and then raise further capital through EIS.
Do I need advance assurance before issuing EIS or SEIS shares?
Advance assurance is not compulsory but is expected by most investors before they commit funds. It involves submitting an application to HMRC asking whether the proposed investment is likely to qualify. It is not a guarantee of relief and the company must still satisfy all conditions at the time shares are issued. Advance assurance should be sought before shares are issued. If circumstances change after HMRC gives advance assurance, those changes must be disclosed when the company submits its compliance statement, and material changes may mean the original assurance no longer applies.
What are knowledge-intensive companies under EIS?
Knowledge-intensive companies are businesses that carry out significant research, development or innovation activity. From 6 April 2026, most knowledge-intensive companies can raise EIS funds of up to £20 million in any 12-month period and up to £40 million over the company’s lifetime. They also benefit from higher employee limits and a longer qualifying age period than most EIS companies, generally 10 years rather than seven. To qualify, a company must satisfy specific conditions relating to its expenditure on research, development or innovation, together with additional tests concerning intellectual property or highly skilled employees. The definition is technical and professional advice is strongly recommended before relying on knowledge-intensive status.
Can a company use both SEIS and EIS?
Yes. A company can raise funds through SEIS first and then raise further investment through EIS. SEIS shares must be issued before EIS shares, and the two types of investment cannot be made on the same day. Once a company has received EIS or VCT investment, it cannot subsequently raise qualifying SEIS investment. Using SEIS followed by EIS can therefore provide a useful funding pathway for growing science and tech businesses. Careful planning around the timing and sequencing of each fundraising round is important to ensure compliance with both sets of rules. Specialist advice before beginning either raise is strongly recommended.
Contact Edwards Accountants today by phone: 01922 743 100 or email: info@edwardsaccountants.co.uk
This article provides general tax information and does not constitute investment advice. Eligibility and relief depend on the circumstances of the company, investor and investment.