SEIS vs EIS: which scheme applies, and when

In short: SEIS applies to companies at the seed stage and gives 50% income tax relief on up to £200,000 a year; EIS applies to slightly older, larger companies and gives 30% relief on up to £1,000,000 a year. Both are set out in GOV.UK's venture capital schemes guidance.

They are separate schemes with separate legislation. The similarity in name causes real confusion, including among experienced investors, so the practical differences are worth having in one place.

Side by side

Which one applies to a given round

This is not a choice the investor makes. It is determined by the company: its age, its size, how much it has already raised, and whether HMRC has authorised it to issue certificates under one scheme or the other. What the investor decides is whether to take part on the terms offered.

As a rule of thumb, a company raising its first external money in its first couple of years will be SEIS. Once it has used its £250,000 SEIS allowance, later rounds move to EIS.

Using both in one round

A single round can be part SEIS and part EIS. The sequencing matters: the SEIS shares must be issued before the EIS shares, and the company must have spent at least 70% of the SEIS money before the EIS shares are issued. Getting the order wrong can invalidate the SEIS relief entirely, which is one of the reasons companies apply for advance assurance first - see advance assurance and the SEIS3 certificate.

The risk profile is not different

The higher SEIS rate reflects the earlier stage, not a better deal. An SEIS company typically has less evidence behind it than an EIS company: less revenue, fewer customers, a shorter track record. The relief is compensation for that, not a discount on it.

Both schemes also require the shares to be full-risk ordinary shares with no preferential rights to assets on a winding up. You cannot engineer downside protection into the instrument and keep the relief. That is covered in who can invest under SEIS.