The myth: if your company qualifies for SEIS and EIS, investors will say yes. The tax relief is so generous that the decision becomes easy, and your job is mostly to tell people you are eligible.
The reality
The Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) are UK government schemes that give tax reliefs to individuals who invest in qualifying early-stage companies. Broadly, they can reduce the cost of the investment through income tax relief, and they offer further reliefs on gains and on losses if things go wrong.
That is valuable. It reduces an investor’s downside. But it does not change the basic question every investor asks: is this a business I believe in, run by people I trust, at a price that makes sense?
An investment that loses money still loses money, even with relief. No sensible investor backs a company they think will fail simply because the tax treatment softens the blow. Relief makes a good opportunity more attractive. It does not make a weak one good.
SEIS and EIS help an investor say yes to a business they already like. They rarely persuade anyone to like it.
Why the myth persists
- The reliefs are significant. Founders hear how much they can reduce an investor’s risk and assume that settles it.
- It is easy to market. “SEIS eligible” is a short, simple line to add to a deck. Building a convincing case is harder.
- Some investors do use it as a filter. Many will only look at qualifying companies. That makes eligibility feel like the deciding factor, when it is really just the entry ticket.
What can go wrong if you lean on it
Treating relief as the main selling point creates two problems. First, investors notice when a pitch is built around tax rather than the business, and it makes them cautious. Second, relief is not guaranteed. A company has to meet the scheme conditions when shares are issued and, in many cases, continue to meet them for a period afterwards. If it stops qualifying, investors can lose relief they were counting on.
Our guide to keeping SEIS and EIS relief intact covers the common ways companies trip up.
What to do instead
- Lead with the business. Your deck should make the case on its own. Mention eligibility clearly, but as a supporting point, not the headline.
- Check eligibility properly. The rules on qualifying companies, trades, timing and the use of funds are detailed. Take advice from an accountant who works with the schemes before you promise anything.
- Consider advance assurance. HMRC offers a voluntary process where it gives its view on whether a company is likely to qualify. Many investors expect to see it before they commit.
- Be careful how you describe it. Explain how the schemes work in general terms. Do not tell investors what relief they personally will get. That depends on their own circumstances, and they should take their own advice.
- Plan to stay qualifying. Build the scheme conditions into your decisions for the years after the raise, so investors keep the relief they invested for.
The short version
SEIS and EIS widen the pool of interested investors and can make a good company easier to back. Use them for that. But build your raise on the strength of the business, the team and the plan. That is what still gets the yes.
This article is general information, not financial, legal or tax advice. If you are planning a raise, talk to BDM Capital.
Frequently asked questions
No. The tax relief reduces an investor’s risk but does not remove it, and experienced EIS investors assess the business as rigorously as any other. Relief is a reason to look, not a reason to invest.
A team they believe in, a market they understand, a credible plan for the money, a realistic valuation and a route to an exit within the timeframe the schemes assume.
No. Advance assurance confirms HMRC’s view that the company is likely to qualify. It is a necessary condition for many investors, not a commitment from any of them.
