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Scale-up Guide: how to qualify for SEIS/EIS investment to fuel your company’s growth

The Seed and Enterprise Investment Schemes (SEIS/EIS) are a great way for scaling businesses to attract investment. But it’s your responsibility to ensure your company obtains and keeps its qualifying status. Read on to understand what to look out for when using the schemes.

Last updated: 23 October 2020

Start planning well before you apply

Some of the rules around SEIS/EIS start two years before you’re looking to raise investment, so it’s essential you plan the application process as early as possible. Most disqualifying events can’t be undone and may ruin your chances of qualifying in the future. By taking advice from the beginning you can make sure you don’t trip up before you’ve even started to raise money. To read an overview of SEIS/EIS download our Scale-up Guide here.

Get advance assurance 

While advance assurance isn’t mandatory for many transactions, investors will in fact take you more seriously if you can demonstrate advance assurance before going to the market, and in many cases will only invest if you have obtained advance assurance. HMRC quote 8-12 weeks for a response to an application, so make sure you factor this in when building a timeline for investment. With correctly presented applications we’ve found that HMRC’s decision can be quicker than their quote, but incomplete applications can lead to delays.

Be clear about your growth and development

HMRC have put a particular focus on the growth and development rules in the last few years and it’s essential you understand what they mean to you and your business. You could risk your application being rejected if you’re not able to articulate to HMRC in a satisfying way why you reach this threshold, whether you’re eligible or not. 

Spend the money

While spending the money may sound like the easy part, HMRC want to see how and what you’re spending the money you raise on. There are detailed rules around what the money can be spent on, and the wrong information in an application can lead to delays to your fund raising. You should always seek advice on your HMRC application for either scheme to avoid any delays or problems that could put off potential investors.

Provide a clear business plan

A clear business plan explaining to HMRC what you want to achieve will help them understand the reason people are investing in your business. Be clear on the information HMRC wants to see, and avoid using assumptions in your application.

Ongoing compliance 

It’s a common misconception that your responsibilities end when you’ve received investment. In fact, there are rules for both the investor and the company for the three years that follow. Taking on further investment, changes to the share structure, or providing other services to existing shareholders can lead to a withdrawal of relief. This can cause a breakdown in the relationship with shareholders, or in more severe cases, legal action as to who is responsible. You can ensure your business benefits from the SEIS/EIS in the long run by understanding your ongoing responsibilities. 

Download our Scale-up Guide: innovative financial advice to help you grow

We’ve created the Scale-up Guide, a practical guide that covers 20 topics on a wide range of financial advice for scaling businesses. Download the guide to sense check and develop your understanding of key considerations to take into account on your growth journey.

Download our Scale-up Guide: innovative financial advice to help you grow

We have created the Scale-up Guide, a practical guide that covers 20 topics on a wide range of financial advice. Download the guide to sense check and develop your understanding of key considerations to take into account on your growth journey.

Looking for more information or support?

Click here to sign up to our scale-up mailing list. Alternatively, if you have a query about any of the topics in this article, get in touch below through the enquiry form.

About the author

Adam Chick

+44 (0)20 7710 3145
chicka@buzzacott.co.uk
LinkedIn

Click here to sign up to our scale-up mailing list. Alternatively, if you have a query about any of the topics in this article, get in touch below through the enquiry form.

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