However big and exciting your business ideas are, you’ll need a way to fund them. 

That’s a common obstacle for many business owners, and there’s no one-size-fits-all approach to it. 

There are several options you could take to raise finance, depending on the type of business you run and what your goals are.

One of those options, which is targeted at early-stage startups, is a venture capital scheme called the seed enterprise investment scheme (SEIS).

Since SEIS was launched in April 2012, a total of 12,900 companies have received investment through it, and more than £1 billion has been raised in funds.

In 2017/18, London and the South East accounted for the largest proportion of investment, with companies in these regions receiving £117 million – 67% of total SEIS investment in the UK that year.

That’s a clear opportunity if your startup is based in this region and seeking venture capital. If you’re thinking of using this scheme, here’s what you need to know.

SEIS explained

SEIS is an investment scheme aimed at helping companies access early-stage funding. 

It encourages investment in startups by offering tax incentives to individual investors who buy shares in qualifying companies.

You can receive a maximum of £150,000 through SEIS investments, but you need to follow the rules of the scheme to be eligible.

Investment through SEIS must be spent on a qualifying trade, or any research and development or preparation needed to carry out the qualifying trade.

You can’t use it to buy shares, unless the shares are in a qualifying 90% subsidiary that uses the money for a qualifying business activity.

Assess your SEIS eligibility

To qualify for SEIS, your company must be less than two years old and within a qualifying trade. 

Most trades qualify, but certain areas are excluded – these are listed on HMRC’s website.

It must also meet the following qualifying criteria:

  • established in the UK
  • fully independent
  • unquoted before beginning the scheme
  • not a member of a partnership
  • has less than 25 employees
  • has gross assets of less than £200,000.

You cannot use the scheme if you’ve already received investment through the enterprise investment scheme (EIS) or from a venture capital trust.

How to apply

Before you go ahead with using the scheme, it’s worth asking HMRC for advance assurance to find out if you’re likely to qualify.

Once you’ve issued your shares, you’ll also need to send a compliance statement to HMRC with supporting documents.

You can only send this when you’ve carried out your qualifying business activity for four months, or spent at least 70% of the amount raised by the relevant share issue.

SEIS or EIS?

More established businesses may not be eligible for SEIS, but they could benefit from the enterprise investment scheme (EIS) instead.

This has similar rules to SEIS, but it’s available to companies with no more than £15 million in gross assets and less than 250 full-time employees.

Aside from EIS and SEIS, there are two other Government-backed venture capital schemes: venture capital trusts and social investment tax relief.

Talk to us if you’re not sure which scheme is best for your company.

We can help

As part of our business startup service, we’ll work with you to understand your funding options, develop an effective business plan to secure investment, and apply for the relevant scheme.

Talk to us for advice on funding your startup.