EIS advance assurance: what changes once you outgrow SEIS

An EIS investor can claim 30% income tax relief on up to £1 million of investment per tax year, or £2 million where the excess goes into knowledge-intensive companies. Shares held for three years are exempt from capital gains tax, gains can be deferred into an EIS subscription, and loss relief applies if the company fails. It is a slightly thinner headline than SEIS, which is exactly why EIS investors care about getting the documentation right.

At the time of the share issue the company must be unquoted and not under the control of another company, have gross assets of no more than £15 million immediately before the issue and £16 million immediately after, have fewer than 250 full-time equivalent employees, and have a permanent establishment in the UK. Knowledge-intensive companies can have up to 500 employees.

The trade must be a qualifying one, and the money has to be spent on growing and developing that trade within two years. Buying the shares or assets of another business, or paying off existing investors, is not what the scheme is for.

The three recurring problems are a first commercial sale more than seven years ago with no prior qualifying investment to extend the window, use of funds described in a way that reads as acquisition or de-risking rather than growth, and group structures where a subsidiary's activity quietly makes a substantial part of the group's trade an excluded one.

All three are far cheaper to fix before filing than after HMRC has opened a line of questions, which is why we start with an eligibility review rather than a form.

Eligibility review, full application pack drafted from your plan and numbers, submission, and HMRC correspondence handled end to end for a fixed £449, whether the application covers SEIS, EIS, or both. Turnaround on our side is measured in days.

How much can a company raise under EIS?

Up to £5 million from risk finance schemes in any twelve-month period, and £12 million over the company's lifetime. Knowledge-intensive companies have higher limits.

What is the seven-year rule?

A company's first commercial sale generally has to have happened within the last seven years for an EIS share issue to qualify. Knowledge-intensive companies get ten years.

Do we need advance assurance if we already have SEIS assurance?

Not automatically, but a fresh application covering the EIS shares is usually worth it, because the conditions tested are different and your EIS investors will ask.

What happens if HMRC says no?

HMRC usually raises questions before refusing. Most refusals we see relate to the risk-to-capital condition, an excluded trade, or money being used to buy an existing business rather than to grow the company.