Start-Ups Fail To Cash In On SEIS Tax Breaks

Many entrepreneurs are not cashing in on the benefits of massive tax breaks offered by the government-backed Seed Enterprise Investment Scheme (SEIS).

Although more than a thousand companies have applied for SEIS approval from HM Revenue & Customs, many other business that could benefit from start-up incentives could still be missing out on funding.

The rules of the scheme are complicated, and not all businesses meet the tough qualifying rules, but many that could turn on the tap for extra investment cash may not realise the opportunity is there for them.

Many entrepreneurs feel SEIS is aimed at technology and pharmaceutical start-ups – but dozens of other industries can benefit as well.

The first step towards SEIS funding is identifying whether a business can apply for the scheme.

Equity investment

Unhelpfully, HMRC has a backwards policy of deciding how a business qualifies for SEIS by listing those that do not rather than those that do.

Read the list of excluded businesses on the HMRC SEIS web site

Even though SEIS comes wrapped in a bundle of red tape to make sure businesses and investors are not setting up a company just to take advantage of the tax breaks, for most entrepreneurs the call between joining SEIS or not is often easy to make.

The business gains much-needed start-up cash as an equity investment – up to £100,000 in a single tax year and a maximum of £150,000 overall.

For the investors, a raft of generous tax breaks are available – from a 50% income tax reduction on tax due in the year to capital gains tax reliefs for putting money in and taking any gains at the end of the three year term.


Should the business fail loss reliefs are triggered for investors as well.

SEIS can also link with other start-up funding models involving equity stakes, including crowdfunding.

For businesses past the start-up stage looking for capital to fund growth, the next step up is the longer-standing Enterprise Investment Scheme (EIS).

EIS runs on similar lines to SEIS, but allows larger funding injections and not quite so generous tax breaks.

After the three-year SEIS term ends, business in the system can step up to an EIS, so shifting between the schemes becomes a natural progression.

Both tax breaks are aimed at reducing risk for investors while making taking equity in new businesses less of a risk.

For full details of the Seen Enterprise Investment Scheme visit and here foor the EIS, visit the HMRC web site.