SEIS and EIS Explained: A Founders Guide to Startup Funding from Pre-Compliance to Post-Raise

For early-stage UK companies, the most significant obstacle to raising money is rarely the business idea itself. It is convincing an investor that the risk is worth taking. This is precisely the problem that the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) were designed to solve. Both schemes give individual investors generous income tax relief in return for backing qualifying UK companies, and both have become central to how startup funding is structured in this country.

Yet the schemes are only as valuable as the compliance work behind them. HMRC will not authorise a company to issue SEIS or EIS certificates unless the application demonstrates, in detail, that every qualifying condition is met. Get the preparation right and an advance assurance decision can arrive in weeks. Get it wrong, and a funding round can stall for months while HMRC raises further questions.

Consultax Chartered Accountants recently supported a client through exactly this process. Our SEIS advance assurance application, covering a proposed investment of £110,000 in ordinary shares, was authorised by HMRC in three weeks, a notably fast turnaround for a scheme where review times can often run into several months. That outcome did not happen by chance. It was the product of thorough, evidence-led preparation from the outset, and it illustrates exactly why the detail of a SEIS or EIS application matters so much to the timeline of a raise.

In this article, we walk through how SEIS and EIS funding works in 2026, what advance assurance involves, how founders should prepare before ever approaching HMRC, and what compliance obligations continue long after the investment has landed.

What Are SEIS and EIS, and Why Do They Matter to Startup Funding?

SEIS and EIS are UK government venture capital schemes that sit behind a large proportion of early-stage fundraising in this country. Both works on the same basic principle: an individual who subscribes for qualifying shares in an eligible trading company receives income tax relief on the amount invested, together with capital gains tax benefits if the shares are held for the required period.

The distinction between the two schemes is one of company stage. SEIS are aimed at the very earliest phase of a company's life, when the trading history is short and the amounts being raised are modest. EIS picks up where SEIS leaves off, supporting larger and slightly more established businesses through subsequent funding rounds. Many companies use the two schemes in sequence: a SEIS round to get the business off the ground, followed by one or more EIS rounds as it scales.

For founders, the appeal is straightforward. A funding round that qualifies for SEIS or EIS relief is materially easier to close, because the tax relief substantially reduces the effective risk an investor is taking on. For investors, particularly angel investors backing pre-revenue companies, that relief is very often the difference between a decision to invest and a decision to wait.

SEIS and EIS Eligibility in 2026: What's Changed

Both schemes were reshaped by legislation taking effect from 6 April 2026, and founders planning a raise this year need to be working from the current thresholds rather than out-of-date figures found in older guidance.

 Alongside the headline limits, both schemes carry a long list of qualifying conditions relating to trade type, independence from other companies, use of funds, and the rights attached to the shares issued. A company engaged in an excluded activity, holding more than 50% ownership by another company, or proposing preference shares with capital preference will typically fail the test regardless of how strong the underlying business is. This is precisely where a properly informed pre-compliance review earns its keep.

Advance Assurance: The Document That Unlocks Investor Confidence

HMRC's advance assurance service allows a company to seek an indication, before any shares are issued, that a proposed investment is likely to qualify for SEIS or EIS relief. It is not a legal requirement, and it is not a guarantee. HMRC's final position depends on the facts at the time the shares are actually issued and remains conditional on the information provided being accurate. In practice, however, most experienced investors and SEIS/EIS funds will not commit capital without it.

A typical advance assurance application requires:

•     A clear description of the trade and confirmation that it does not fall within an excluded activity

•     Up-to-date incorporation documents and details of the company's group structure, if any

•     A business plan and financial forecast showing how the funds raised will be used to grow the trade

•     Details of the proposed share class, confirming shares are full-risk ordinary shares with no preferential rights

•     Evidence of at least one prospective investor genuinely interested in the round

Once submitted with a properly completed SEIS1 or EIS1 form and reviewed favourably, HMRC issues a compliance certificate under Section 257EC(1) of the Income Tax Act 2007 (for SEIS) authorising the company to certify shares to investors, subject to the legislation in force at the time of any share issue. HMRC's own Venture Capital Schemes Manual reference VCM60240 sets out how this assurance interacts with the eventual compliance statement, and is worth reading in full before an application goes in.

Getting Pre-Compliance Right: What We Check Before We Ever Contact HMRC

The three-week turnaround we secured for our client's £110,000 SEIS round was not the result of a stroke of luck with HMRC's queue. It reflected a deliberate pre-compliance review carried out before the application was ever submitted, covering:

•     Trading history and start date, to confirm the company genuinely falls within SEIS's three-year window

•     Gross asset position immediately before the proposed share issue, tested against the £350,000 ceiling

•     Share rights and articles of association to rule out any preferential rights that would disqualify the shares

•     Use of proceeds, mapped explicitly against the qualifying trade to close down HMRC's most common follow-up question

•     Group structure and connected-party shareholdings, to confirm the 30% ownership limit was not breached

Where HMRC does raise supplementary questions, the speed of the response matters just as much as its accuracy. Founders who can answer promptly, with supporting evidence already prepared, avoid the drawn-out correspondence that causes many advance assurance applications to run well beyond three months.

Case Study: Advance Assurance Approved in Three Weeks

Our client, an early-stage UK company, approached us ahead of a proposed £110,000 investment round of ordinary shares. Rather than submitting a bare-minimum application, we carried out a full pre-compliance review of the company's trading history, asset position, share structure and use of proceeds before a single document went to HMRC.

The result was a clean SEIS advance assurance application with no gaps for HMRC to query. Confirmation of provisional authorisation, permitting the company to issue compliance certificates once the properly completed SEIS1 form is submitted, was received within three weeks of submission well ahead of the typical timeline founders should expect to plan around, which can often stretch to two or three months during busier periods.

That speed mattered commercially. The company's prospective investor was ready to commit as soon as assurance was confirmed, and the shortened timeline meant the round could close while investor appetite was still at its peak. It is a good illustration of a wider point: advance assurance is not simply a box-ticking exercise. Done properly, it is a genuine accelerant to a funding round.

After the Raise: SEIS1, EIS1 and the Three-Year Compliance Window

Advance assurance is the beginning of the compliance journey, not the end of it. Once shares have actually been issued, the company must submit a compliance statement form SEIS1 for SEIS shares or EIS1 for EIS shares no earlier than four months after the trade has begun and only once at least 70% of the SEIS funds raised, where applicable, have been spent on the qualifying trade. HMRC then issues formal compliance certificates, which investors need in order to claim their own income tax relief through self-assessment.

From that point, both the company and its investors are subject to a three-year qualifying period. During this window, relief can be withdrawn or reduced if any of the following occur:

•     The company stops carrying on a qualifying trade, or begins a non-qualifying activity

•     There is a change of control, or the company becomes a subsidiary of another business

•     Value is returned to investors, whether by way of a buyback, loan repayment or other benefit

•     An investor disposes of their shares before the third anniversary of the share issue

Founders rising under SEIS or EIS should build these restrictions into ordinary business planning, not treat them as a one-off compliance exercise to be forgotten once the money has landed. A share buyback agreed casually eighteen months after a raise, for example, can unwind tax relief for every investor in that round.

Common Pitfalls We See Founders Make

•     Applying for EIS advance assurance before SEIS shares have been issued, which breaches the required sequencing between the two schemes

•     Underestimating gross assets at the point of share issue, rather than at incorporation, which can tip a company over the SEIS or EIS ceiling

•     Issuing shares with any element of capital preference, disqualifying the round from relief entirely

•     Treating advance assurance as optional paperwork rather than the document that gives an investor confidence to sign

•     Failing to track use of funds against the qualifying trade, leaving the company unable to evidence compliance when SEIS1 or EIS1 is due

How Consultax Supports Founders Through SEIS and EIS

At Consultax Chartered Accountants, we work with founders from the earliest stages of a funding round through to post-raise compliance. Our lead partner, Varun Gupta ACA, trained at PwC and spent close to a decade in investment banking with UBS and BNP Paribas, and brings that background in structuring, valuation and financial due diligence directly to how we prepare SEIS and EIS applications.

As an ICAEW-regulated firm, every engagement we take on is backed by professional indemnity insurance and a recognised standard of continuing professional development safeguards that matter when the accuracy of a SEIS or EIS application can determine whether an entire funding round proceeds on schedule.

·         Pre-Compliance Review: We check trading history, gross assets, share class, group structure and use of proceeds against SEIS/EIS conditions before anything is submitted to HMRC.

·         Advance Assurance Applications: We prepare and submit SEIS and EIS advance assurance applications, giving prospective investors the confidence they need to commit.

·         SEIS1 / EIS1 Compliance Statements: Once shares are issued, we handle the compliance statement HMRC requires before investors can claim their relief.

·         Three-Year Monitoring: We help you avoid the disqualifying events buybacks, change of control, and non-qualifying trades that can unwind investor relief after the raise.

If you are planning a funding round and want to understand whether your company qualifies for SEIS or EIS, or you simply want a second opinion before submitting an advance assurance application, we would be pleased to talk it through with you.