The SEIS glossary.

How to use this SEIS glossary

Terms are grouped by theme, in the order most people meet them. Jump straight to a section from the links above, or start with our beginner’s guide if the scheme itself is new to you.

The scheme basics

SEIS

The Seed Enterprise Investment Scheme. A UK government scheme that gives investors generous tax reliefs for buying new shares in very early-stage companies. A company can raise up to £250,000 under it.

EIS

The Enterprise Investment Scheme. SEIS’s bigger sibling for later, larger raises: 30% income tax relief and higher limits. Companies often use SEIS first, then EIS.

VCT

A Venture Capital Trust. A listed fund that invests in qualifying companies. Investors buy shares in the trust rather than in a single company, with 30% income tax relief.

Qualifying trade

A genuine commercial trade run to make profits. Most trades qualify; a list of excluded activities does not.

Excluded activities

Trades SEIS shuts out, including dealing in land or shares, most financial services, leasing, legal and accountancy services, property development, farming, hotels, nursing homes and most energy generation.

New qualifying trade

The trade must be less than 3 years old when the SEIS shares are issued, measured from the first commercial sale rather than the date of incorporation.

Gross assets

Broadly everything the company owns. For SEIS, gross assets must be under £350,000 immediately before the shares are issued.

Risk-to-capital condition

HMRC’s test that the company genuinely intends to grow and that the investor’s money is genuinely at risk. It blocks schemes engineered to be safe.

Sunset clause

A built-in end date in the legislation for a relief. The EIS and VCT sunset was extended to April 2035; SEIS was made a permanent part of the tax system.

The reliefs

Income tax relief

The headline SEIS relief: 50% of the amount invested comes off the investor’s income tax bill, on up to £200,000 invested per tax year.

Capital gains reinvestment relief

Reinvest a capital gain into SEIS shares and half of that reinvested gain can be exempt from Capital Gains Tax, within the £200,000 annual limit.

Capital gains disposal relief

Hold SEIS shares for at least 3 years, with income tax relief given and not withdrawn, and any gain when selling those shares is free of Capital Gains Tax.

Loss relief

If the shares are sold at a loss or become worthless, the loss (after deducting income tax relief already received) can be set against income or capital gains.

Carry back

Treating a SEIS investment as if it were made in the previous tax year, so the relief can be used where it helps most.

Three-year holding period

The minimum time SEIS shares must be held. Sell within 3 years and the income tax relief is clawed back.

Withdrawal of relief

What happens when a condition is broken after investment: selling early, becoming connected, receiving value from the company, or the company losing its qualifying status.

The process and paperwork

Advance assurance

An informal indication from HMRC, requested before a raise, that a company looks likely to qualify. Investors usually want to see it. It is not a guarantee and it is not the relief itself.

Compliance statement (SEIS1)

The form a company files with HMRC after it has traded for at least 4 months and spent at least 70% of the money raised, confirming it has met the conditions.

SEIS2

The letter HMRC sends the company authorising it to issue certificates to its investors, once the compliance statement is accepted.

SEIS3 certificate

The certificate the company gives each investor. It is the document an investor needs to claim the relief.

Self Assessment

The tax return through which an investor claims SEIS relief, using the details on the SEIS3 certificate.

Spending condition

At least 70% of the money raised under SEIS must be spent on the qualifying business activity before the compliance statement can be filed.

Share issue

The moment the company formally issues new ordinary shares to investors. SEIS relief attaches to newly issued shares, not shares bought from someone else.

Advance subscription agreement (ASA)

An agreement where an investor pays now for shares issued later. Common in early rounds, but the timing rules matter for SEIS, so it needs careful handling.

People and the connection rules

Connected person

Someone too close to the company to claim SEIS income tax relief: broadly anyone holding more than 30% of the company, or an employee. Directors can qualify in defined cases.

The 30% rule

The shareholding line for connection. An investor who controls more than 30% of the shares, voting rights or assets is connected and loses the income tax relief.

Business angel

An individual who invests their own money in early-stage companies, often the typical SEIS investor.

Receiving value

Taking money or benefits back from the company after investing, such as a loan or an above-market payment. It can reduce or remove the relief.

Investing terms

Ordinary shares

The plain, full-risk shares SEIS requires. They cannot carry preferential rights that shelter the investor from risk.

Illiquidity

The practical reality that SEIS shares are hard to sell. There is no ready market, so investors should expect to hold for years.

Due diligence

The checking an investor does before committing: the business, the team, the numbers and the SEIS position itself.

Diversification

Spreading investments across several companies rather than one, the standard way experienced angels manage early-stage risk.