The Difference Between SEIS and EIS – The Clearview Explanation

Starting a new company is a challenging feat. Besides putting together a team, finding a location,
and developing the concept, there’s the immense task of raising funds. It’s no surprise that investors
tend to be cautious of unproven entrepreneurs and ideas, contributing to the 20% failure rate of UK
startups in their first year.

As an entrepreneur or business owner, you may have heard of SEIS and EIS, two UK government
schemes designed to support small and growing businesses. Both SEIS and EIS offer tax relief
incentives to investors, but they are not the same. In this blog, we will explain the similarities and
differences between SEIS and EIS and help you understand which scheme may be right for your
business.

EIS and SEIS schemes explained. 

SEIS and EIS are two schemes introduced by the UK government to encourage investors to support
early-stage companies. SEIS stands for Seed Enterprise Investment Scheme, while EIS means
Enterprise Investment Scheme.
SEIS was introduced in 2012 and aims to support early-stage businesses by offering tax incentives to
investors. Essentially, SEIS encourages investors to buy shares in new startups by offering a range of
tax reliefs. EIS, on the other hand, was introduced in 1994 and is designed to help small, high-risk
companies raise capital by offering tax relief to investors.

Are SEIS and EIS the same thing?

No. Because the acronyms are so similar It can seem confusing to understand the difference
between eis and seis. Although both schemes seek to attract investment into high-growth smaller
and younger UK companies, there are significant differences between the programmes. The key
difference is that SEIS is aimed exclusively at startups and early-stage enterprises, while EIS is
suitable for bigger businesses.

It’s important to know that SEIS and EIS are NOT sources of venture capital. Rather, they are tax
incentives provided by the government in the form of tax relief to those who invest in qualifying
businesses. So don’t confuse these programs with cash investments – but do take advantage of the
potential tax benefits they offer.
Eligibility Criteria:
One of the main differences between SEIS and EIS is the eligibility criteria for companies and
investors.

SEIS eligibility

To qualify for SEIS, a company must have been trading for less than two years, have fewer than 25
full-time employees, and have gross assets of less than £200,000. In addition to this, SEIS companies
can accept no more than £250,000 SEIS funding total.

Advantages Of SEIS

The SEIS scheme holds great power for entrepreneurs, fast-growing businesses, and investors.
Firstly, the scheme makes it far easier for a company to attract investment. Secondly, it enables
those investments to raise more money, which when combined is beneficial for investors.

Drawbacks Of SEIS

The company must continue to trade under the criteria for three years after the investment.
Investors may want to be involved in business decisions to protect their stake, impacting autonomy
of the small business. Not all businesses will be eligible for SEIS.

EIS eligibility

In contrast, to be eligible for EIS, a company must have been trading for less than seven years, have
fewer than 250 full-time employees, and have gross assets of less than £15 million. Individual or
corporate investors have an investment limit of £1 million per tax year. The company can accept up
to £5 million per tax year and no more than £12 million EIS funding total. Corporate investors in EIS
do not receive tax relief on their investment.
Similarly, investors must meet certain criteria to be eligible for SEIS and EIS tax relief. For SEIS,
investors must not already own more than 30% of the company’s shares, and they can invest no
more than £100,000 per year. For EIS, the limit is £1 million per year, and investors can own up to
30% of the company’s shares.

Advantages To EIS

The EIS scheme is a great way to support and promote smaller businesses and SMEs, forming a
better platform for growth and amplification. There is significant loss relief available through using
the EIS scheme, benefiting both investors along with any smaller company invested into.

Drawbacks To EIS

Like any investment scheme, there is always risk that accompanies potential reward. Inevitably there
is more risk involved in investing in smaller businesses than in larger businesses. If the small business
does not succeed, the EIS scheme can soften the blow, as well as amplify any gains if it does succeed.

What is EIS Tax Relief?

Both SEIS and EIS offer tax relief incentives to investors, but the benefits are different. Under SEIS,
investors can claim income tax relief of up to 50% of the amount invested, up to a maximum of
£100,000 per year. They can also claim tax relief on any losses made on their investment and are
exempt from paying capital gains tax on any profits made from selling their shares.
EIS tax relief is slightly different. Investors can claim income tax relief of 30% on the amount
invested, up to a maximum of £1 million. They can also claim tax relief on any losses made on their
investment and are exempt from paying capital gains tax on any profits made from selling their
shares. In addition, they can defer capital gains tax on any profits made from other investments.

Which Scheme is Right for your Business?

Deciding which scheme is right for your business will depend on a variety of factors, such as the
stage of your business, the size of your company, and your future growth plans. SEIS may be more
suitable for very early-stage businesses that are just getting off the ground, while EIS may be better
suited for businesses that are a little further along in their growth journey and are looking to scale
up.

Get help with SEIS or EIS

The government website is good place to start in terms of getting further guidance.
Make sure to review all requirements and exclusions before applying. Stay current with HMRC
guidelines and government advice on tax relief eligibility. Consult the guidance for comprehensive
information on the EIS and your potential qualification. For further support in attracting investment,
the Clearview resources page has lots of hints and tips.

In summary, SEIS and EIS are two UK government schemes designed to support early-stage
businesses by offering tax incentives to investors. The main differences between the two schemes
are the eligibility criteria for companies and investors, the level of tax relief offered, and the stage of
growth at which they are most suitable. To ensure you choose the right scheme for your business,
it’s always best to seek advice from a professional and consider the long-term implications of
participating in either scheme. No matter the choice you make, both SEIS and EIS are great ways to
secure funds for your business, attract investors, and support the growth of your company.