Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong. Take 2 mins to learn more

What is EIS & SEIS?

Contributor: Simon Strojan


From time to time we put opportunities on EquitySpark that are EIS or SEIS applicable. So what does this actually mean?

The Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS) are two government initiatives that aim to encourage innovation by offering UK tax payers a significant tax break for investing in early stage, growth-focused and high-risk companies.

EIS is focused on medium size start-ups and allows an individual to invest up to £1 million per tax year and receive a 30% tax break in return. The investor will also pay no capital gains tax on any profit arising from the sale of shares after three years.

SEIS is focused on very small sized start-ups and allows for an even bigger tax break of up to 50% on investments up to £100,000 per tax year. As with EIS, investors will benefit from a capital gains tax exemption on any profit arising from the sale of shares after 3 years.


Capital Gains Tax Exemption

If shares are sold and the investor makes a loss, they may offset the loss against their capital gains tax. You must however have held the shares for a minimum of three years.


Inheritance Tax Exemption

With these schemes there is no inheritance tax to pay on shares held for two years.


Loss Relief

If a loss is made after three years, an investor can offset that loss against their capital gains tax or income tax. This can be claimed in the tax year they realised the loss in or the following one. For example, say you invested £10,000 into an EIS qualifying company, and after three years that company loses all its value. Your at risk capital will be £10,000 minus whatever you have offset against your income tax. Lets say for all intents and purposes your actual at risk capital is £7,000. On a tax bracket of 45%, your loss relief will be effectively £7000 x 0.45 = £3,150. This means that in total your actual loss for the investment is £3,850 (£7,000 - £3,150).

The infographic below runs through three different scenarios of an investor on an income tax rate of 45%.


EIS Infographic



Now there are certain rules you must abide by to benefit from EIS and SEIS.

  • You must not sell your shares for a minimum of 3 years.
  • You must be a UK tax payer
  • You can only invest up to a maximum on £1 million (EIS) or £100,000 (SEIS) in each tax year
  • You cannot be ‘connected’ to the investee company through employment, directorship or partnership from the period of at least two years before your investment to three years after the investment.
  • You cannot have a 30% or more shareholding in the company or any of its subsidiaries.


Carry Back

There is a possibility of ‘carry back’ for all or part of your EIS/SEIS investment to the previous tax year provided that the limit for relief is not exceeded for that year. This means that if you invest in an EIS qualifying company in the 2019/20 tax year, you could carry back the associated tax relief to the 2018/19 tax year (as long as your EIS/SEIS cap for 2018/19 is not exceeded).


EIS Advance Assurance

It is important to note there are many rules and considerations for what company qualifies for EIS. There no guarantee a company will be eligible for EIS, however companies can apply to HMRC for EIS ‘Advance Assurance’ which gives a provisional indication to whether a company might be able to apply for tax relief to its investors or not.


Applying for EIS/SEIS as a Company

For more information on how to apply for EIS/SEIS status please see this link.


Remember, when investing your capital is at risk


Best wishes,

The EquitySpark Team

Risk Warning & Disclaimer

Equity Spark Limited is authorised and regulated by the Financial Conduct Authority (FRN: 665367).

The content of this promotion has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000. Reliance on this promotion for the purpose of engaging in any investment activity may expose an individual to a significant risk of losing all of the property or other assets invested.

Investing involves risks, including loss of capital, illiquidity, lack of dividends and dilution, and should be done only as part of a diversified portfolio. Please read the Risk Warnings before investing. Investments should only be made by investors who understand these risks. Tax treatment depends on individual circumstances and is subject to change in future.

The Webpage it is not intended to be a promotion of any individual investment opportunity and is not an offer to the public. The summary information provided about investment opportunities on this webpage is intended solely to demonstrate the types of investments available on the Equity Spark platform, and any investment decision should be made on the basis of the full campaign. Full campaigns are available to investors who have become authorised to invest on the Equity Spark platform. All investment activities take place within the United Kingdom, and any person resident outside the United Kingdom should ensure that they are not subject to any local regulations before investing.

Equity Spark does not make investment recommendations to you. No communications from Equity Spark, through this website or any other medium, should be construed as an investment recommendation. Further, nothing on this website shall be considered an offer to sell, or a solicitation of an offer to buy, any security to any person in any jurisdiction to whom or in which such offer, solicitation or sale is unlawful. Equity Spark does not provide legal, financial or tax advice of any kind. If you have any questions with respect to legal, financial or tax matters relevant to your interactions with Equity Spark, you should consult a professional adviser.