Seed Enterprise Investment Scheme (SEIS) 

The SEIS legislation is closely modelled on that for the EIS, but it is intended to help small, new start-up companies (rather than the more established companies typical of the EIS) by offering a higher rate of relief. Its main features are as follows:


  • Income tax relief at 50% on amounts of up to £100,000 a year subscribed for qualifying SEIS shares
  • No chargeable gain arises on disposal of the shares
  • Amounts invested may be used to defer tax on other chargeable gains arising in 2012/13 and later years

The SEIS came into force on 6 April 2012. Originally it was due to terminate in 2017, but it was made permanent in 2014.

See: Enterprise Investment Scheme (EIS)

This article is set out in 3 sections

  1. Conditions for relief; these are quite extensive and must be met for certain qualifying periods.
  2. Using the relief
  3. Withdrawal of relief
  4. Administration


  1. Conditions for relief 

The requirements for SEIS income tax relief are that a subscription must be made:

  • by a qualifying investor;
  • for eligible shares;
  • in a qualifying company.

In addition, there must be no disqualifying arrangements in place.
A breach of any of the conditions may lead to relief being withdrawn.
The maximum subscription by an individual in one tax year for which income tax relief may be given is £100,000.
For the meaning of Periods A and B in this section, the same definition applies as provided by the Enterprise Investment Scheme (EIS). Note, however, that for the SEIS, Period B always ends on the third anniversary of the trade.

HMRC has issued a form to be used by companies seeking assurance in advance that a share issue will meet the qualifying conditions for the SEIS.


Qualifying investor 

The requirements for a qualifying investor are shown in the following table. The investor must:

Requirement 1 Qualifying period 2
Be an individual (None)
Have subscribed for the shares for genuine commercial reasons and not as part of a tax avoidance scheme (None)
Not be connected with the issuing company Period A except as noted below
Not have received a linked loan Period A
Note :
1. In general the requirements are very similar to those for the EIS, and reference should be made to the indicated paragraphs.
2. The condition must be satisfied throughout the period indicated.

An individual is connected with the company in the same circumstances as for an EIS company, with the exception that the prohibition on being an employee is confined to Period B. For this purpose, the individual is not connected simply by reason of being a director (unlike the EIS).

  1. The investor can be non-resident .
  2. The rules for nominees and reciprocal arrangements are as for the EIS.


Eligible shares 

The conditions for eligibility are similar to those for the EIS. In particular:

  • shares must be newly issued, fully paid up ordinary shares acquired by subscription for cash;
  • the purpose of the share issue must be to raise money for a qualifying business activity in relation to a new qualifying trade;
  • the shares must be issued for genuine commercial purposes and not as part of a tax avoidance scheme;
  • shares may not be redeemable, or certain types of preference share; and
  • there must be no pre-arranged exit arrangements.

The principal differences from the EIS are discussed in the following paragraphs.

Funds raised 

The amount which may be raised by the company through the SEIS in the 3 years ending on the date of issue of the shares must not exceed £150,000 . The company must not have previously raised any EIS or VCT funds .

All of the money (or all but an insignificant amount) raised by the issue of shares must be used by the company (or its qualifying 90% subsidiary) for the purposes of the qualifying business activity for which it was raised by the end of Period B . The rules for determining whether this condition has been met are similar to those for the EIS.

If money is raised under the SEIS, at least 75% of it must be utilised as above before any investment in the company can qualify for the EIS or a VCT.


Qualifying company 

The company must satisfy three sets of conditions:

  • one set at the date the shares are issued;
  • another set throughout Period A; and
  • a further set throughout Period B.

Conditions to be satisfied at the date of issue The company must:

Be unquoted 1 (and there must be no arrangements in place for it to cease being so)
Not exceed a maximum permitted level of gross assets 2 and number of employees 2
Not be in financial difficulty
Not have previously raised funds under the EIS or VCT
Have a qualifying trade that is a new qualifying trade 3
Note :
1. Shares on the Alternative Investment Market (AIM) and the PLUS Quoted and PLUS Traded Markets are not considered to be quoted for this purpose.
2. The company may not have gross assets of more than £200,000 and must have fewer than 25 employees.
3. A qualifying trade is “new” if:

  • it was not carried on (by the company or anyone else) before the period of 2 years ending immediately before the day on which the SEIS shares are issued; and
  • neither the company nor any 51% subsidiary has carried on any other trade before.

Conditions to be satisfied throughout Period A The company must:

Be neither the 51% subsidiary of another company 1 nor controlled by another company
Not be a member of a partnership or LLP
1. In relation to shares issued on or after 6 April 2013, this requirement does not apply providing that the company was a subsidiary only during a period when it had:

  • issued only subscriber shares; and
  • not begun, or begun preparations for, its trade or business.

This ensures that a company established by a corporate formation agent before being sold on to its new owners will not inadvertently be disqualified from the SEIS.

Conditions to be satisfied throughout Period B  The company must:

Have a permanent establishment in the UK
Exist wholly for the purposes of carrying on one or more qualifying trades, or be the parent company of a trading group
Carry on a qualifying business activity
Control no non-qualifying subsidiaries
Have no property managing subsidiary that is not a qualifying 90% subsidiary
The details of these conditions are similar to those for the EIS.



UPDATE 15/12/14

EIS, SEIS and VCT: exclusion of energy-generating activities 

In relation to shares issued on or after 6 April 2015 , certain companies (excluding community organisations) whose trade consists wholly or substantially of the subsidised generation of energy from renewable sources will cease to be eligible for investment under the EIS, SEIS or VCT. This exclusion will apply if:

  • the activities involve anaerobic digestion or hydroelectric power; or
  • the company enters into a Contract for Difference.

When the enlargement of the SITR receives EU clearance, community organisations will be similarly excluded from the EIS. However, eligibility for the SITR will be extended to allow activities for which a Feed in Tariff subsidy is receivable.
Draft Finance Bill 2015


  1. Using the relief 


Provided all the conditions are met, the individual may claim relief either on the self-assessment tax return or by submitting a claim accompanied by form SEIS1 which will be issued by the company. Relief is given as a tax reduction.

There is no maximum investment limit, but the maximum amount on which relief will be given in one tax year is £100,000. If more than one investment is made in a tax year, relief will be attributed to the shares in a similar manner to the EIS .
Relief may be carried back by treating the shares as acquired in a previous year, in a similar manner to the EIS. However, a claim may not be carried back to any year before 2012/13.

A claim for relief cannot be made until either:

  • the trade has been carried on for 4 months; or
  • at least 70% of the money raised has been spent for the qualifying business purpose.

The claim must be made within 5 years from the filing date for the tax year in which the shares were issued.


  1. Withdrawal of relief 


Income tax relief may be withdrawn in the following circumstances:

A breach of conditions by the investor, the company or the shares
A receipt of replacement capital
A disposal of the shares
A return of value to the investor
The making of payments to non-SEIS investors

The details of these conditions, and the way in which the withdrawal operates, are similar to those for the EIS.
Assessments to withdraw relief are made for the year in which the relief was originally given. In some circumstances the amount to be withdrawn is computed using the rate at which the relief was originally calculated, which is known as the SEIS original rate .


  1. Administration 


The SEIS is administered by the Small Companies Enterprise Centre (SCEC) of HMRC.

The investor and the company both have a duty to notify HMRC within 60 days of any change in circumstances that means that the investor is no longer a qualifying individual or the company is no longer a qualifying company.
An inspector who believes that the individual or company has not provided the required information may issue a notice requesting the details.

Information may also be requested in connection with:

  • the winding up, dissolution, administration or receivership of the company or a subsidiary; or
  • arrangements that are in place for a company to cease to be a qualifying 90% or 50% subsidiary.

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