Seed Enterprise Investment Scheme

Photo of author
Written By Mohsen Salami

The Seed Enterprise Investment Scheme of just SEIS for short, was introduced to act as the necessary booster for some of Britain’s most promising start-ups and the economy as a whole. With financial conditions worsening, and banks refusing small businesses the required funding to make a go of it, SEIS as a concept made investing in this important sector practically risk-free, and it continues to do so.

While the UK government can be roundly applauded for the introduction of the Seed Enterprise Investment Scheme (SEIS) and the impact it has had thus far on the British economy, there is still a worryingly large number of entrepreneurs and start-ups – not to mention investors – who have never heard of it.

The scheme offers tax-breaks in return for investment at levels which have never before been witnessed on these shores, and high-bracket financiers are chomping at the bit to invest in a qualifying project which takes their interest. There are plenty to choose from too.


The scheme does have a degree of complexity, as anything managed by HMRC tends to have, but it can be unravelled in an easy-to-digest guide from This is a website dedicated to all aspects of SEIS, and we have found their guide to be essential reading in assisting our coverage of one of the most significant pieces of beneficial legislation introduced by the Tories – ever.

The downloadable guide is available as a PDF and contains in-depth information for entrepreneurs and investors. It is a must-have document for investors in 2015, as many look for alternatives to the wavering stock market.


The guide offers information on the following aspects of SEIS for investors:

  • Income Tax Relief
  • Capital gains Tax Relief
  • Inheritance Tax Relief
  • Loss Relief
  • Methods of Investment
  • A Guide to the Process


The guide also offers start-ups and entrepreneurs a detailed guide on how to apply and qualify for funding through the SEIS. For any young business needing funding, it is an essential guide.

You can get a copy of the guide at

What Is A Qualifying Trade?

Companies must qualify for investment – simply put, that means some trades are banned from SEIS.

The trades that qualify, according to a starchy definition from HM Revenue and Customs, are those operating commercially with a view to making a profit.

Rather than give a list of trades that do qualify as a SEIS, bizarrely, the rules give a list of those that do not.

The guide is if a company ‘wholly or substantially’ operates banned trades, then it falls outside of SEIS and the tax benefits do not apply to investors.

Qualifying SEIS trades explained

Wholly is quite straightforward, but ‘substantially’ less so. HMRC reckons substantially means the banned trade contributes 20% or more of the profits or turnover to the business.

If you are considering a SEIS investment, here’s a list of the excluded activities from HMRC which are not acceptable to the scheme:

  • Risky investments by dealers involved in land, commodities or futures – like equities, securities or other financial instruments
  • Handling goods except as a retailer or wholesale distributor
  • Financial services – including banking, insurance, debt-factoring, HP finance or money lending
  • Hiring out assets
  • Taking in royalties or licence fees except those generated by intangible assets created by the company
  • Accountancy or legal services
  • Developing property
  • Agricultural activities like farming and market gardening
  • Forestry, timber and woodland ownership and management
  • Heavy industries like ship building, coal mining and producing steel
  • Running hotels, nursing homes or care homes
  • Most businesses that generate or export electricity involving the Feed-In Tariff
  • Providing services to someone else whose business is mainly excluded activities who also controls the company providing the services

Spending the money

Besides the trade of a company in a SEIS, investors also need to keep a watch on how their investment is spent or HMRC will withdraw their tax breaks.

The rules require

  • All money raised is spent within three years of the date of the share issue, although HMRC will ignore an ‘insignificant’ amount of unspent cash
  • The money is spent on a qualifying activity
  • The issuing company or a 90% subsidiary must carry on the qualifying business activity

The investment cannot be spent on stocks and shares, unless it’s a 90% subsidiary that spends the money.

A qualifying business activity is different from a qualifying trade – and is either:

  • Running a qualifying trade
  • Preparing to operate a qualifying trade
  • Research and development that will result in a new qualifying trade