The importance of EIS and SEIS to investors

SEIS EIS Blog

Early-stage businesses often need all the help they can get, no one ever said it was easy to start and run a business!

You’ve done all the practical stuff, created a team, found your premises, and built the concept.  Now you’re looking for further funding so you can scale your business for growth.

As you can imagine investors are cautious when it comes to start-ups. A startling statistic adds to that caution – up to 29% of UK businesses fail in their first year.

In 1994, the Government introduced the Enterprise Investment Scheme (EIS) and then in 2012 the Seed Enterprise Investment Scheme (SEIS). Generous incentives for investors, providing valuable tax relief to individual investors who buy new shares in a company.

EIS & SEIS are successful schemes; so far, more than £23 billion has been raised, £1.7bn of that in 2020/2021.

EIS and SEIS schemes are detailed and complex. Our aim here is to raise awareness of the schemes for start-up businesses (and potential investors) and to provide a very high-level overview.  Dorset Business Angels recommend gov.uk as an excellent place to begin your further research into such schemes.

The key differences between SEIS & EIS

SEIS is targeted at start-ups and early-stage businesses. Eligibility criteria for companies under SEIS:

  • Less than 2 years of trading history
  • Up to 25 employees at the time of investment
  • Individual investors can invest up to £100K per tax year
  • SEIS companies can accept no more than £150K SEIS funding in the total lifetime of the business

In April 2023 the amount an investor can invest increases to £200K, companies can accept up to £250K and the maximum age of a company increases from 2 to 3 years. The company’s gross asset limit is also being increased from £200K to £350K.

EIS is targeted at businesses that are larger and more established. Criteria for companies under EIS:

  • A permanent establishment in the UK
  • Carry on a qualifying trade as defined by the EIS
  • Up to 7 years of trading history
  • Not listed on the stock exchange and not under the control of another company
  • Up to 250 employees at the time of investment
  • Gross assets of less than £15M immediately pre-investment and £16K immediately afterwards
  • Individuals or corporate investors can invest up to £1M per tax year or £2M for Knowledge Intensive Companies (KIC)
  • Knowledge Intensive Companies (KIC) can have up to 10 years of trading history or (where the company makes an election) from the date that the company reaches an annual turnover of £200,000.
  • EIS companies can accept up to £5M per tax year
  • EIS companies can accept no more than £12M funding in the total lifetime of the business
  • Corporate investors do not receive tax breaks on their investment

Companies defined as ‘knowledge intensive companies’ (KIC) have been given additional opportunities to offer tax advantages to investors e.g., employee limits are higher, at 500 and a higher lifetime limit of £20M that can be received from an EIS investment.

What’s in it for the investor?

Aside from angel investors enjoying backing early-stage businesses and being involved with mentoring and support, there is also a financial incentive for them:

  • Under EIS there is up to 30% income tax relief is available for investors on up to £1M of investment per tax year. There are other benefits for investors, among them exemption from capital gains tax, loss relief and inheritance tax relief.
  • Under SEIS there is up to 50% income tax relief up to £100K (soon to be £200K) across all investments per tax year. There are further benefits among them a reduction in capital gains tax inheritance tax relief and loss relief.

There are several further qualifying conditions for investors and companies to consider and we recommend further research is undertaken and professional advice sought.

EIS and SEIS require the companies to gain clearance from HMRC. This information must be shared with investors. As part of the due diligence process, investors will look to seek confirmation of a company’s provisional or confirmed acceptance under either scheme.

UKBAA says “The schemes have been provided by the Government in recognition of the risks that angel investors take and to show their backing for this important source of finance of small businesses.­­”

DBA Director and Angel Investor Frank Guinn comments “Without the above SEIS/EIS schemes, only a fraction of the £1.7bn that was raised last year from Angel Investors would probably have been injected into start-up and early-revenue companies.

Taking a minority equity stake in this type of enterprise, naturally comes with a ‘high-risk’ label attached, but against this, the immediate tax credit on making the investment, the prospect of a double-digit tax-free return on exit, and the loss relief available should the business fail, make this a highly attractive proposition for anyone wishing to support good, highly scalable new businesses.”

If you are a local start-up business (or based elsewhere in the UK) and ready to approach business angels for the first time, or are in a new round of funding, then please do get in touch to explore the opportunity to pitch at one of our popular events. Check out the Entrepreneur Resources page on our website for all the details.

Formed in 2013, Dorset Business Angels is a member of the UK Business Angels Association and in 2019 signed up to the Investing in Women Code.


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At each pitch event, there will be 5 business presentation pitches of 10-15 minutes, to suit all investor appetites. These will be selected by the Dorset Business Angels directors nearer to the event. Short summaries will be posted to our Events page and distributed via our newsletter ahead of the event. Each pitch includes a Q&A session and is followed by an investor debate, held privately.

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