How much can a company raise?
A qualifying company can receive up to £250,000 through the Seed Enterprise Investment Scheme (SEIS). This is a total company limit, not a fresh allowance each tax year or a separate limit for every investor. The amount available depends on the company’s previous SEIS investment and relevant de minimis state aid received in the three years up to the investment.
For example, a company that has already received £100,000 of SEIS investment may have up to £150,000 of capacity left, before taking account of relevant aid and the other qualifying conditions. Splitting a round across investors or different share issues does not reset the cap.
Which other limits matter?
At the share issue, the company and its subsidiaries must have no more than £350,000 of gross assets and fewer than 25 full-time equivalent employees in total. The new qualifying trade must not have been carried on for more than three years. That test concerns the trade, including any previous owner, rather than simply the company’s incorporation date.
The business must also meet the wider SEIS conditions. Being within the funding, asset and employee limits does not by itself establish eligibility. The qualifying activity, share rights, use of funds and risk-to-capital requirements all need to be considered.
Check earlier funding and the order of investment
Review earlier SEIS subscriptions and any government funding or support before setting the round structure. Not every grant automatically reduces the available SEIS amount. Where the treatment is unclear, ask the funding provider or scheme administrator whether it is relevant de minimis aid and keep the response with the company’s records.
A company that has already received EIS or venture capital trust investment cannot then use SEIS. Where a round includes both SEIS and EIS, agree the sequence of the share issues before funds are committed. SEIS investment also counts towards the applicable limits for later venture capital scheme investment.
The investor limit is different
An individual investor can generally claim SEIS Income Tax relief on up to £200,000 of qualifying subscriptions for a tax year. The relief rate is 50%, subject to the investor’s eligibility and available Income Tax liability. This is separate from the company’s £250,000 total fundraising limit.
An investor’s carry-back election may affect the tax year in which relief is claimed. It does not create extra company SEIS capacity. Founders should avoid promising a particular tax result to an investor before both the company and investor conditions have been checked.
What to check before the round
Bring together the cap table, earlier share issues, prior SEIS proceeds, grant and aid records, latest balance sheet, employee count and trading history. Reconcile these with the proposed amount, share terms and timetable. The funds must be used within three years of the share issue for a qualifying business activity.
Advance assurance can help investors understand HMRC’s view of the proposed investment, but it is not a guarantee of relief. After the investment, the company still needs to complete the compliance process and receive HMRC authorisation before issuing investor certificates.
Plan the next step
Startup CFO can help review the proposed round, prepare an advance assurance application and support the compliance work after investment. We agree the scope before starting.
Discuss SEIS support