Guidance

UseApply to use the Seed Enterprise Investment Scheme to raise money for your company

Find out ifhow yourthe companyscheme orworks, socialincluding enterprise’sissuing proposalshares toand raiseraising money meets the conditions of SEIS and how to apply.submit a compliance statement.

The Seed Enterprise Investment Scheme (SEIS) is one of 4 venture capital schemes - check which is appropriate for you.

How the scheme works

SEISThe isscheme:

  • offers designed to help your company raise money when it’s starting to trade. It does this by offering tax reliefs to individual investors who buy new shares in your company.

    company
  • helps your company to raise money when it’s starting to trade

You can receive a maximum of £150,000 through SEISSeed investments.Enterprise Investment Scheme. This will:

  • include any other de minimis state aid received in the 3 yearsyears, up to and including the date of the investment
  • count towards any limits for later investments through other venture capital schemes

There are various rules you must follow so your investors can claim and keep SEISthe Seed Enterprise Investment Scheme tax reliefs relating to their shares.

Tax reliefs will be withheld, or withdrawn, from your investors if you do not follow the rules for at least 3 years after the investment is made.

CompaniesBefore you apply

You’ll need to check:

  • that your company can use the scheme
  • what you can do with money raised
  • if this is a new qualifying trade
  • you meet the risk to capital condition

Check that your company can use the scheme

Your company can use the scheme if it:

Your company and any of its 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

IfYou cannot use the Seed Investment Enterprise Scheme, if you’ve received investment through the Enterprise Investment Scheme (EIS)(EIS) or from a venture capital trust,trust you cannot use SEIS.(VCT).

About

What the investment

The shares you issuecan mustdo meetwith themoney same requirements as shares issued under EIS.

raised

The money youraised raiseby from the investmentnew share issue 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’s expected to lead to a qualifying trade such as a project to make an advance in science or technology

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.

NewCheck if if this is new qualifying trade

If your company is already carrying out a qualifying trade,trade, it must not have been carried out for more than 2 years by either:

  • your company
  • any other person who then transferred it to your company

Your company, or any qualifying subsidiary, must not have carried out any other trade before you started the new trade.

Your company’s trade must be treated as a commercial business with the aim of making profits. However, your trade will not qualify if it consists mostly of an excluded activity.

Before

Meeting raisingthe risk to capital condition

The investment in your company must meet the risk to capital condition. This means:

  • your company must have the intention to grow and develop its trade over the long term for example, you’ll use the investment to grow things like your revenue, customer base and number of employees
  • the investment should be a risk to the investors’ capital

The growth and development of your company should be permanent and not rely on the investor’s continued support.

The investment should carry a risk that the investor will lose more capital than they are likely to gain as a net return.

HMRC will not consider the maximum return an investor could get if your company is successful, because this cannot be guaranteed.

The net return includes:

  • income from dividends, interest payments and other fees
  • capital growth
  • upfront tax relief

When deciding if you meet the risk to capital condition, we will look at things like your company’s:

  • sources of income
  • assets
  • structure
  • use of subcontractors
  • marketing of the investment opportunity
  • relationship with other companies

You will not meet the risk to capital condition if there are risk reducing arrangements in place that result in an investor:

  • getting priority over other investors
  • being able to withdraw their money as soon as possible
  • protecting their money so that other investors money is used first

Issuing shares

You can ask HMRC if your share issue is likely to qualify before you go ahead, this is called advance assurance.

How

The shares you issue must be paid up in full, in cash, when they’re issued. Your company should have a way to apply

accept payment before shares are issued.

To qualify for the Seed Enterprise Investment Scheme the shares issued must be full risk ordinary shares which:

  • are not redeemable
  • carry no special rights to your assets

The shares you issue can have limited preferential rights to dividends. However, the rights to receive dividends cannot be allowed to accumulate or allow the dividend to be varied.

When you’veyou issue the shares there cannot be an arrangement:

  • to guarantee the investment or protect the investor from risk
  • to sell the shares at the end of, or during the investment period
  • to structure your activities to let an investor benefit in a way that’s not intended by the scheme
  • for a reciprocal agreement where you invest back in an investor’s company to also gain tax relief
  • to raise money for the purpose of tax avoidance the investment must be for a genuine commercial reason

After you have issued shares

To allow your shares,investors to claim Seed Enterprise Investment Scheme tax reliefs you must completefirst submit a compliance statement (SEIS1)(form andSEIS1) sendto itHMRC tofor HMRC.the shares issued.

Apply with a compliance statement

You can submit a compliance statement if you are:

  • the company secretary
  • a director
  • an agent

EmailYou HMRCcan authorise an agent to askapply foron thisyour formbehalf. inThey’ll Welshneed (Cymraeg)to provide a signed letter dated within the last 3 months confirming that they are entitled to act on your behalf.

You need to:

  1. Issue your shares.

  2. Complete a compliance statement (SEIS1).

  3. Send it to us.

Start now .

If you’veyou gothave advance assurance,assurance you’ll need to provide copies of any documents that have changed since HMRC gave you advance assurance.

If you’ve not got advance assurance, you must provide the following information for your company and its subsidiaries:

  • the business plan and financial forecasts
  • a copy of the latest accounts
  • an explanation of how you meet the risk to capital condition
  • details of all trading and activities to be carried out, and how much you expect to spend on each activity
  • an up to date copy of the memorandum and articles of association
  • the information memorandum, prospectus or other documents used to explain the fundraising proposal to your investors
  • details of any other agreements between your company and the shareholder
  • a list of the amounts, dates and venture capital schemes under which you’ve previously received investment
  • any other documents to show you meet the qualifying conditions

You can only submit your compliance statement when you’ve:

  • carried out your qualifying business activity for 4 months
  • spent at least 70% of the amount raised by the relevant share issue

You must complete a separate applicationstatement for each share issue.

Send

What yourhappens application

next

YouIf canwe emaildo ornot postagree yourthat compliancethe statementconditions andof supportingthe documents.

Email:scheme enterprise.centre@hmrc.gsi.gov.uk.

Post:

Venturehave Capitalbeen Reliefsmet, Team
WMBC
HMwe Revenuewill write to you telling you why and Customs
BX9how 1BN
you can appeal the decision.

What

If happenswe next

agree:

  1. IfWe your application is successful, HMRC will send you a letter of authorisation, a unique reference number and a compliance certificatescertificate (form SEIS3) to give to your investors.

  2. TheYou lettermust willuse includethe a unique investment reference number.number You must include this on the compliance statementscertificates you give to yourinvestors investors. Investorsthey’ll need this and the compliance certificate and reference number to be able to claim tax relief.

  3. WhereYou HMRCmust decidesfollow the investmentsscheme dorules notfor meetat SEISleast requirements,3 we’llyears writeafter tothe youinvestment explainingis why.made If youotherwise disagree,tax yourelief canwill askbe HMRCwithdrawn tofrom reviewyour the decision, or appeal against it.investors.

Further

Get more information

You can find more information in the HMRC Venture Capital Schemes Manual.

If you have further questions about your SEIS sectioncompliance ofstatement or the HMRCSEIS Ventureyou Capitalcan Manual.email: enterprise.centre@hmrc.gov.uk.

For any claims by investors you can contact us.

Published 16 June 2017
Last updated 131 JuneJanuary 20222023 + show all updates
  1. We have updated form SEIS1 to complete a compliance statement for the Seed Enterprise Investment Scheme.

  2. The link for the compliance statement (SEIS1) has been updated.

  3. The new SEIS compliance statement and information on the unique investment reference has been added.

  4. First published.