How venture capital schemes work

There are 3 schemes designed to help small or medium sized companies grow by attracting investment. They offer tax reliefs to individuals who buy and hold new shares, bonds or assets for a specific period of time.

The company, investor and proposed investment must meet the conditions of whichever scheme you opt for.

You can ask HMRC if they agree your proposal to raise money is likely to qualify before you apply, but you must check the conditions of the scheme first.

Investors

Any advance assurance given to a company using the Venture Capital Trust (VCT,), The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) is only in respect of certain conditions of the venture capital schemes being met. This is based on the information provided by the company.

It should not be read as a more general endorsement or as an indication of potential investment performance. Investors are recommended to consider conducting their own due diligence before making any investment.

Who can apply

Your company must:

• have a permanent establishment in the UK
• carry out a trade that qualifies
• plan to spend the investment on a qualifying trade
• not be listed on a recognised stock exchange at the time of investment
• not be controlled by another company

You must also meet the specific qualifying conditions of whichever scheme you opt for.

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
• running a nursing home
• generation of energy, such as electricity and heat
• production of gas or other fuel
• exporting electricity
• banking, insurance, debt or financing services

Find a full list of, and more information about non-qualifying trades in the HMRC manual.

Limits on the money you raise

There’s no minimum, but there’s a maximum amount you can raise depending on which scheme you opt for.

The maximum amount youmost companies can raise in thetheir lifetime of your company for:

• SEIS investments is £250,000
• Enterprise EIS Investment Scheme and VentureVCT Capital Trust investments is £12£24 million

ThereThe mayamount beyour highercompany limitscan ifraise under the EIS and VCT investment will depend on its circumstances:

• If your company is based in based in Northern Ireland and carries on a trade in goods or wholesale electricity you can find out more in VCM12030 for EIS and VCM55130 for VCT

• if your company carries out research, development or innovation and and meets certain conditions.conditions then you may be able to raise more money

The Enterprise Investment Scheme (EIS)

Your company (or group of companies if you’re a parent company) may qualify if at the time of investment it has:

• no more than £15 million in gross assets
• less than 250 employees
• been no more than 7 years since it’s first commercial sale
• no more than £30 million in gross assets (£15 million for specified companies)

There may be higher limits if your company carries out research, development or innovation and meets certain conditions.

Find out more about Enterprise Investment Scheme.

The Seed Enterprise Investment Scheme (SEIS)

Your company (or group of companies if you’re a parent company) may qualify if it is less than 23 years old, and at the time of investment has:

• no more than £350,000 in gross assets
• less than 25 employees
• not previously carried out a different trade

You will not qualify if you’ve already had investment through EIS or a VCT.

Find out more about Seed Enterprise Investment Scheme.

Social Investment Tax Relief (SITR)

Tax reliefs under the Social Investment Tax Relief scheme will not be available for new investments made on or after 6 April 2023.

Venture Capital Trust (VCT)

A Venture Capital Trust is a company that has been approved by HMRC and invests in, or lends money to, unlisted companies.

A Venture Capital Trust may invest in your company if it has:

• no more than £15£30 million in gross assets (£15 million for specified companies)
• less than 250 employees
• not been more than 7 years since its first commercial sale

There may be higher limits if your company carries out research, development or innovation and meets certain conditions.

Find out more about Venture Capital Trusts in the HMRC manual.