Kicking off 2025, we’ve noticed a distinct uptick in companies raising private investment in the Norwich area. Four of the companies we support, RetaQR, Moss Monkey, ViridiPath and Glowfrog Games are actively raising. Glowfrog and RetaQR have already received pre-approval for a UK tax incentive scheme called the Seed Enterprise Investment Scheme (or SEIS), which is designed to help very early-stage UK companies get access to venture capital.
This post aims to show you around the basics of SEIS and what to consider if you want to use it to raise money for your company.
What is SEIS and why does it matter?
SEIS offers really attractive tax reliefs to investors who back qualifying startups. Investors get 50% of their investment back in tax reliefs. Just think about that for a second – for every £1 someone invests they can get 50p back from the tax man. It makes early stage, often risky, investments a lot more attractive. Later, if the ship comes in and the investor is able to achieve a positive return from their investment, they also don’t have to pay capital gains tax on that upside. Given that Capital Gains Tax went up in the last Budget this is another reason to look at SEIS investments.
SEIS investments can attract big institutional money, but more often than not, it’s Angel investors who are the main participants in these rounds. Investing in very early-stage ventures is high-risk, with potential high reward – but also the chance of losing your shirt. We think the SEIS scheme is a great way to connect startups with private money and take some of the downside risk away for investors.
Steps to a successful SEIS application
If you think raising money for your startup might be the way to go, you’ll need to do a bit of homework:
- Check your eligibility – your company must be UK-based, trading for less than three years, and have gross assets under £350,000. You also can’t have more than 25 employees at the time of investment.
- Apply for advance assurance – while not mandatory, this step gives potential investors confidence that HMRC will approve your SEIS status. Advance assurance requires submitting business details, investment plans, and a list of potential investors.
- Structure your investment correctly – SEIS funds must be used for qualifying business activities. This includes product development, hiring, and expansion, but not acquiring other companies.
- Stay compliant – post-investment, you must use funds within three years and follow some HMRC rules to maintain SEIS benefits.
The one-shot rule
One of the most nerve-wracking things about applying for SEIS is that you only get to apply once. If your application is botched and rejected, that’s it: there are no second chances to apply. This makes it crucial to prepare thoroughly and be methodical in your approach to your application. Common mistakes, such as missing a bit of required info or failing to meet eligibility requirements, can lead to a rejection…and there’s no having a second try.
Because SEIS is such a powerful funding incentive, getting it right the first time is essential. Make sure your business plan is solid, your compliance is airtight, and your investment structure aligns with HMRC’s requirements. The guidance and notes on gov.uk are admirably clear – just make sure you’re paying attention!
Common pitfalls to avoid in the pre-approval process
- Incomplete or incorrect documentation – submitting an incomplete application or providing inaccurate information can lead to delays or outright rejection.
- Lack of clear business plan – HMRC wants to see a well-defined plan detailing how the SEIS investment will be used for growth and development.
- Failure to identify potential investors – while advance assurance doesn’t require committed investors, indicating genuine interest from potential investors strengthens your case.
- Ignoring SEIS eligibility criteria – failing to check key criteria (e.g. trading activities, business age, asset limits) before applying can lead to automatic rejection.
The other way to take confusion and stress out of SEIS stuff is – you guessed it – to be part of an awesome startup community where people who have done it before will always find time to help you when you are tangling with things like this. So, if raising private investment might be somewhere in your future, feel free to get in touch.