EIS and SEIS accountancy services

EIS is designed to help your company raise money to help with business growth. It does this by offering tax relief to individual investors who buy new shares in your company.

SEIS is designed to help your company raise money when it is starting to trade. It does this by offering tax relief to individual investors who buy new shares in your company.

Your company can use the scheme if it:

• has a permanent establishment in the UK
• is not trading on a recognised stock exchange at the time of the share issue and does not plan to do so
• does not control another company other than qualifying subsidiaries
• is not controlled by another company, or does not have more than 50% of its shares owned by another company
• does not expect to close after completing a project or series of projects. 

Your company and any qualifying subsidiaries must:

• not have gross assets worth more than £15 million before any shares are issued, and not more than £16 million immediately afterwards
• have less than 250 full-time equivalent employees at the time the shares are issued
• your company must carry out a qualifying trade. If you are part of a group, the majority of the group’s activities must be qualifying trades. 

You must use the investment for a qualifying trade.

Most trades will qualify, including any research and development which will lead to a qualifying trade.

However, your company may not qualify if more than 20% of your trade includes things like:

• coal or steel production
• farming or market gardening
• leasing activities
• legal or financial services
• property development
• running a hotel
• generation of energy, such as electricity and heat
• production of gas or other fuel
• banking, insurance, debt or financing services. 

Under the EIS scheme investors could claim back up to 30% of the value of their investment in form of income tax relief.

Under the SEIS scheme investors could claim back up to 50% of the value of their investment in form of income tax relief.

The money you raise from the investment must be spent within 3 years of the share issue. You must spend the

money on either:

• a qualifying trade
• preparing to carry out a qualifying trade
• research and development that is expected to lead to a qualifying trade. 

You cannot use the investment to buy shares, unless the shares are in a qualifying 90% subsidiary that uses the money for a qualifying business activity.

SEIS focuses on smaller businesses in their first two years of trading, whereas EIS is aimed at helping businesses to grow who have been trading between two to seven years.

Each scheme has different qualifying criteria and the tax incentives are also slightly different for investors.

Your company can use the scheme if it:

• carries out a new qualifying trade
• is established in the UK
• is not trading on a recognised stock exchange at the time of the share issue
• has no arrangements to become a quoted company or a subsidiary of one at the time of the share issue
• does not control another company unless that company is a qualifying subsidiary
• has not been controlled by another company since the date of your company being incorporated. 

Your company and any qualifying subsidiaries must:

• not have gross assets over £200,000 when the shares are issued
• not be a member of a partnership
• have less than 25 full-time equivalent employees in total when the shares are issued. 

If you have received investment through the Enterprise Investment Scheme (EIS) or from a venture capital trust, you cannot use SEIS.

If your company owns or controls any other companies, they must be ‘qualifying subsidiaries’.

This means:

• your company must own more than 50% of the subsidiary’s shares
• no one other than your company or one of its other qualifying subsidiaries can control this subsidiary
• there cannot be any arrangements which would put someone else in control of this subsidiary. 

The subsidiary must be at least 90% owned by your company where either the:

• business activity you are going to spend the investment on is to be carried out by the qualifying subsidiary
• subsidiary’s business is mainly property or land management. 

The money raised by the new share issue must be used for a qualifying business activity, which is either:

• a qualifying trade
• preparing to carry out a qualifying trade (which must start within 2 years of the investment)
• research and development that is expected to lead to a qualifying trade. 

The money raised by the new share issue must:

• be spent within 2 years of the investment, or if later, the date you started trading
• not be used to buy all or part of another business
• pose a risk of loss to capital for the investor
• be used to grow or develop your business. 

The investment in your company must meet the risk to capital condition, which means:

• your company must use the money for growth and development
• the investment should be a risk to the investor’s capital. 

You can receive investment under EIS if it is within 7 years of your company’s first commercial sale, or if part of a group, the group’s earliest commercial sale.

If you received investment in this period under EIS, SEIS, SITR, VCT or other state aid, you can use EIS to raise money for the same activity as long as you showed you were planning to do so in your original business plan.

If you did not receive investment within the first 7 years, or now want to raise money for a different activity from a previous investment, you will have to show that the money:

• is required to enter a completely new product market or a new geographic market
• you are seeking is at least 50% of your company’s average annual turnover for the last 5 years.