Angels tend to obsess over the investor reliefs - the 50% off an SEIS cheque, the 30% on EIS - and treat the company side as a box the founder will have ticked. It's the wrong way round. None of those reliefs exist unless the company itself qualifies, and a startup that looked eligible on paper can quietly fall out of the rules between term sheet and completion. If the company doesn't qualify, neither does your relief. So it pays to know what the tests are.
The short version: a startup qualifies when it's young enough, small enough, independent enough, and doing the right kind of trade. SEIS sets the bar low and tight, for the very first money in. EIS picks up companies that have grown past the SEIS lines but are still firmly early-stage. Below, what each of those words means in practice.
What makes a company eligible for SEIS?
The Seed Enterprise Investment Scheme is built for companies at the very start - often pre-revenue, sometimes pre-product. The company-side tests are correspondingly strict. To qualify when it issues SEIS shares, a company must broadly be:
- Trading for less than 3 years. SEIS is meant for genuinely new ventures, so the clock matters.
- Below 25 full-time-equivalent employees. Part-timers count proportionately towards the figure.
- Holding gross assets under £350,000 immediately before the shares are issued. "Gross assets" means everything the company owns before deducting what it owes.
- Within the £250,000 SEIS lifetime cap. That's the total a company can ever raise under SEIS, across every round combined - not per year.
On top of those numbers, the company must be a UK-taxed business carrying on a qualifying trade (more on excluded trades below), not be controlled by another company, and use the money raised for the qualifying activity within roughly three years. Miss the window on any one of these and the SEIS status can be lost - sometimes retrospectively, which is the part that catches people out.
SEIS is for the first money in. EIS is for the money after that.
What makes a company eligible for EIS?
The Enterprise Investment Scheme is the bigger, broader sibling. It's designed for companies that have outgrown the SEIS limits but are still early-stage and still need risk capital. The company-side thresholds are higher, and a couple of them changed in April 2026, so these are worth checking against the source rather than memorising. According to HMRC's EIS guidance, a qualifying company must broadly:
- Have fewer than 250 full-time-equivalent employees when the shares are issued.
- Hold gross assets of no more than £30 million before the share issue (and no more than £35 million immediately after).
- Raise the money within 7 years of its first commercial sale, in the usual case.
- Stay within annual and lifetime funding caps across all the venture capital schemes - currently up to £10 million a year and £24 million over the company's lifetime, with lower caps for some companies. The April 2026 changes touched these limits, so confirm the figure that applies on gov.uk before relying on it.
As with SEIS, the company must carry on a qualifying trade, be independent, have a permanent UK establishment, and deploy the funds for growth within the time limit. The through-line is that EIS rewards money put at real risk in a growing business - not capital parked somewhere safe.
Knowledge-intensive companies get more room
There's a special EIS category for research-heavy businesses. A knowledge-intensive company - one doing significant R&D or innovation, judged on spending plus either skilled headcount or intellectual property - gets a more generous set of EIS limits: a higher employee ceiling, a longer window from first commercial sale, and larger funding allowances. It also matters on the investor side, because the higher individual EIS allowance only opens up where at least part of the money goes to knowledge-intensive companies. The precise KIC thresholds are detailed on gov.uk, and that's the figure to use rather than a number remembered from a deck.
Which trades are excluded?
This is where otherwise-promising deals fall over. SEIS and EIS only back what HMRC treats as genuinely risky, growth-oriented trades. A long list of activities is excluded because the Revenue regards them as lower-risk or asset-backed. The main ones:
- Dealing in land, commodities, futures, shares or other financial instruments
- Banking, insurance, money-lending, debt factoring and other financial activities
- Property development and most property-backed businesses
- Farming, market gardening, forestry and running woodlands
- Operating or managing hotels, guest houses, nursing homes or care homes
- Generating or exporting electricity and certain subsidised energy activities
- Legal and accountancy services
A company can carry on a small amount of excluded activity as long as it isn't a "substantial" part of what the business does. But if the excluded trade is the point of the company, no amount of paperwork will rescue eligibility. A fintech that is really a lender, or a "proptech" that is really developing property, is the classic trap.
How does an angel check a company actually qualifies?
Founders are not always rigorous about this, and the responsibility for getting the relief ends up sitting with you. Three practical checks do most of the work.
One: ask for the advance assurance letter. Before a round, the company can apply to HMRC for advance assurance - a pre-investment indication that, on the facts given, the company looks eligible. It isn't a cast-iron guarantee, and it doesn't bind HMRC if the facts change, but a serious SEIS/EIS round will almost always have one. Its absence is a reason to ask why.
Two: check the share terms. The reliefs only attach to new, full-risk ordinary shares paid up in cash, with no preferential rights to dividends or to assets on a winding-up. If the round is being done on shares with downside protection, the SEIS/EIS treatment can fail even when the company itself qualifies.
Three: confirm the basics yourself. Incorporation date against the trading-age limit, rough headcount against the employee ceiling, and the trade itself against the excluded list. None of this is exotic, and a five-minute look at Companies House plus a direct question to the founder catches most problems before they cost you a relief.
After the round completes, the company files its compliance statement with HMRC and issues you an SEIS3 or EIS3 certificate. That certificate is what you use to claim. Until it lands, the relief is a promise, not a fact - so it's worth knowing roughly when to expect it.
One last point, and it's the important one: this is general information about how the schemes work, not financial or investment advice. The rules carry detail and exceptions this piece doesn't cover, and they change. Before you act on any of it, check the current position on gov.uk and take advice from an FCA-regulated adviser or a tax specialist.
Frequently asked questions
Can a company use both SEIS and EIS?
Yes. A qualifying company can raise its first money under SEIS and later raise more under EIS, provided it meets each scheme's tests at the relevant time. In practice many seed-stage startups use SEIS for the earliest cheques and switch to EIS once they outgrow the SEIS limits. The SEIS shares must usually be issued before, or on the same day as, the EIS shares.
Does the company or the investor apply for SEIS and EIS?
The company does. It seeks HMRC advance assurance before the round, then after the shares are issued it submits a compliance statement and issues SEIS3 or EIS3 certificates to investors. Investors use those certificates to claim their reliefs through Self Assessment. An investor cannot make a company eligible; eligibility rests entirely on the company side.
Which trades are excluded from SEIS and EIS?
HMRC excludes a list of activities it treats as lower-risk or asset-backed. These include dealing in land, shares or commodities, financial activities such as banking, insurance and money-lending, property development, farming, running hotels or nursing homes, energy generation that benefits from certain subsidies, and legal or accountancy services. If more than a small proportion of the company's activity is an excluded trade, it will not qualify.
What is a knowledge-intensive company?
A knowledge-intensive company (KIC) is one doing significant research, development or innovation, measured against tests on spending and either skilled-employee numbers or intellectual property. KICs get more generous EIS limits - a higher employee ceiling, a longer window from first commercial sale, and larger funding allowances. The current KIC thresholds are set out on gov.uk, which is the figure to check before relying on them.
How can an angel check a company really qualifies?
Ask to see the HMRC advance assurance letter for the current round, confirm the share class is ordinary shares with no preferential rights, and check the company's incorporation date and headcount against the scheme limits. Advance assurance is HMRC's pre-investment indication that the company looks eligible. It is not a guarantee, but its absence is a reason to ask more questions.