SEIS Eligibility for Founders: Can Your Company Use It?
Age, trade, gross assets, employees and independence: every SEIS eligibility test in founder terms, with the traps that catch real raises.
In this article
Before you build a pitch deck around SEIS, spend ten minutes on SEIS eligibility and check your company can actually use it. The tests are specific: a trade under 3 years old, fewer than 25 staff, gross assets under £350,000, no more than £250,000 raised under the scheme, and a genuine commercial trade that is not on the excluded list. This guide walks each test in founder terms, with traps I wish someone had listed for me.
The SEIS eligibility tests, one by one
1. Your trade is under three years old
The clock starts at your first commercial sale, not at incorporation. A company incorporated four years ago that only started selling last year is fine. A company that bought or inherited a trade someone else started years ago may not be. If your history is anything but simple, this is the first thing to check properly.
2. Fewer than 25 full-time equivalent employees
Counted at the date the shares are issued, full-time equivalents rather than headcount, so two half-timers count as one. Founders count too.
3. Gross assets under £350,000
Measured immediately before the issue, and it is everything the company owns, cash included. The classic trap is tranches: bank the first close and your own raise can push you over the line before the second close. Sequence the paperwork so the test is passed at each issue.
4. No more than £250,000 under SEIS, ever
A lifetime cap, not annual, and certain de minimis state aid you have already received counts against it. If you have had grants, check before you promise investors the full amount.
5. A qualifying trade
Most real businesses qualify. The excluded list is aimed at asset-backed and financial activities: dealing in land or shares, banking and lending, leasing, legal and accountancy services, property development, farming, hotels, care homes, and most energy generation. Edge cases exist, an app for hotels is not a hotel, so classify honestly and get advice if you are near a line.
6. Independent, unquoted, and genuinely risky
No parent company, no listing, no arrangements for either, and a real intention to grow with investor money genuinely at risk. HMRC’s risk-to-capital condition exists to filter out schemes engineered to be safe, and it is applied with common sense: real startups pass it by being real startups.
Two conditions about your investors, not you
Your investors must subscribe cash for new ordinary shares with no preferential downside protection, and anyone holding more than 30% or employed by the company cannot claim the relief. Family money needs care: parents and children aggregate with founders for the 30% test far more often than people expect. Directors can invest and claim, which is why angel-directors are common.
Eligibility does not end at the raise
The conditions run for three years after each issue. Getting acquired, listing, drifting into an excluded activity, or returning value to investors inside the window can claw back your investors’ relief retrospectively, and investors remember who cost them relief. Treat the rules as a three-year commitment, not a gate you pass once. The most common failure patterns are worth ten minutes.
If you tick every box
Your next move is advance assurance, HMRC’s informal pre-check that investors will ask about before committing. Run the printable checklist first, and if anything above was ambiguous for your company, that is precisely the moment for a professional adviser rather than optimism.
When each test is measured
Half the confusion around eligibility is timing. Each test has its own moment.
| Test | Measured |
|---|---|
| Trade age (under 3 years) | At the date of each share issue |
| Gross assets (£350,000) | Immediately before each issue |
| Employees (under 25 FTE) | At the date of each issue |
| £250,000 raise cap | Cumulative, lifetime, counting relevant state aid |
| Qualifying trade and independence | At issue and for 3 years after |
| Use of funds and 70% spend | Before the compliance statement can be filed |
Gross assets and tranches: the worked trap
Suppose your assets today are £280,000 and you plan to raise £200,000 in two closes of £100,000. Close one lands and is banked: assets are now £380,000. Close two is issued a fortnight later, and the test, measured immediately before that second issue, fails at £380,000. Same round, same money, and the second tranche of investors just lost their relief. The fixes are boring and effective: issue both tranches on the same day where you can, or sequence issues before funds are banked, with advice on the mechanics. Never let the timetable be an accident.
Excluded activities: the edge cases founders actually hit
- Software for an excluded sector is usually fine. A booking platform for hotels is a technology trade; running the hotel is not. The test looks at what your company does, not who its customers are.
- Marketplaces and fintech need care. The moment your model involves lending, holding client money or dealing in financial instruments, you are brushing the excluded list. Classify with an adviser, not with optimism.
- Agencies and consultancies sit on a line. Legal and accountancy services are excluded; most other genuine service trades qualify. Productised services are generally stronger ground than fee-for-hours professional work.
- Property adjacency is the classic wound. Development and dealing are out; a genuine construction-tech or management-software trade can be in. If land value drives the returns, expect scrutiny.
If you fail a test today
Failing SEIS is rarely the end of tax-advantaged fundraising. Too old, too big or too far along usually means you are an EIS candidate instead, with 30% relief and much higher limits. A trade classification problem is sometimes a structuring problem with a lawful fix, and sometimes a fact you must simply accept. What you must never do is dress the facts for the application; assurance obtained on a wrong description protects nobody, and the clawback lands on your investors. When in doubt, spend the hour with a professional before you spend anyone’s money.
The evidence that settles arguments later
Every test above is provable on the day and painful to reconstruct later. Date-stamp the file as you go: management accounts or a balance snapshot immediately before each issue for the assets test, a simple FTE schedule for the headcount, the first-invoice evidence behind your trade-age answer, and the state aid tally behind your £250,000 headroom. This is the same file advance assurance draws on, and the same one your investors’ advisers will ask for in diligence, so building it once is three jobs done.
Common questions
Who is eligible for the SEIS scheme?
UK companies with a genuine commercial trade under 3 years old, fewer than 25 full-time equivalent staff, gross assets under £350,000, no more than £250,000 raised under SEIS, unquoted and independent, with investor money genuinely at risk.
Does the three-year limit run from incorporation?
No, from your first commercial sale. An older shell that started trading recently can still qualify; an acquired older trade may not.
Can founders or family invest under SEIS?
Employees cannot claim, and anyone over 30% (counting close family holdings together) cannot claim. Directors can, in defined cases.
Do grants affect how much SEIS I can raise?
They can. Certain de minimis state aid counts against the £250,000 lifetime cap, so check before committing the full amount to investors.
Sources
gov.uk, Apply to use SEIS · HMRC Venture Capital Schemes Manual
