Two things decide an SEIS investment: whether the tax relief holds, and whether the business is worth the risk. Relief is withdrawn from investors if the company breaks the scheme rules within three years of the share issue (HMRC), and HMRC’s advance assurance is a view that shares are likely to qualify, not an endorsement of the business or its prospects (HMRC). The founder is the person who can answer both.
Rules and figures here are as at 9 October 2026. Our SEIS guide for investors explains the reliefs themselves.
Part one: will the relief hold?
1. Do you have advance assurance, and what has changed since?
Advance assurance is HMRC’s opinion, based on what the company told it, that a share issue is likely to qualify. It covers only some of the conditions, does not say whether any individual investor qualifies and, for companies new to the schemes, usually needs details of potential investors (HMRC). It is not automatic: of 4,085 SEIS applications received in 2025 to 2026, HMRC had approved 3,090 (76%) by March 2026 (HMRC statistics).
Ask to see the letter and the documents behind it. If the plan, the share terms or the use of money has changed, the company must tell HMRC when it files its compliance statement, or the assurance no longer applies. Our feature on what advance assurance means for investors goes further, and SEIS Investments’ founder guide to advance assurance shows what companies submit.
2. Does the company meet the SEIS limits today?
The tests apply when the shares are issued (HMRC). Ask the founder to confirm, with evidence, that:
- the trade has not been carried on for more than three years, and the company has not carried on a different trade before;
- gross assets are no more than £350,000 and there are fewer than 25 full-time equivalent employees, across any subsidiaries;
- total SEIS money, with other de minimis state aid from the previous three years, will not exceed £250,000;
- the company has never received EIS or VCT investment, is not controlled by another company and has no arrangements to become quoted, or a subsidiary of a quoted company, at the time of issue.
3. What exactly is the qualifying trade?
The trade must be run commercially with a view to profit, and the company does not qualify if its activities consist mainly of excluded activities (HMRC). HMRC’s manual lists them, including dealing in land or shares, financial activities, leasing, receiving royalties or licence fees, legal or accountancy services, property development, farming, running hotels or care homes and energy generation (VCM3000). Ask for a plain description of every revenue stream, and where any intellectual property sits.
4. How will the money be spent, and by when?
The money must be spent within three years of the issue on the qualifying trade, preparing to carry it on, or research and development expected to lead to it, and not on buying shares except in a qualifying 90% subsidiary (HMRC). Ask for the budget for the round. Ask too when the company expects to file its SEIS1 compliance statement, which it can do only after four months of trading or once 70% of the money is spent; that timing drives when you receive the SEIS3 you need to claim.
5. How does the round meet the risk-to-capital condition?
HMRC wants a company that intends to grow over the long term and an investment that carries a genuine risk of losing more capital than the investor is likely to gain as a net return, counting the tax relief (HMRC). The shares must be full-risk ordinary shares, paid for in cash, with no right to be redeemed and no preferential right to assets on a winding up. Any arrangement guaranteeing the investment, protecting investors from risk or requiring a sale at the end of the period rules relief out. Ask to see the articles of association and any side letters.
6. Is anything connecting me to the company?
This one is about you. You cannot claim if you or an associate become an employee other than as a director (VCM32020), or if you and your associates hold more than 30% of the shares, votes or rights on a winding up (VCM32030). Ask whether any loan, fee or reciprocal investment is linked to the round. Value you receive from the company later, beyond exempt items such as reimbursed director expenses, a normal commercial rate of interest or a reasonable commercial rent, reduces relief (VCM36080).
7. Who will watch the three-year rules?
Relief can be withdrawn within three years of the issue if the investor becomes an employee or takes a substantial interest, if the shares stop being eligible, if the company stops qualifying or if it fails to spend the money as required; selling shares or receiving value reduces it (VCM36010). Ask who in the company tracks these conditions, and whether investors will be told promptly if something changes. Investors who receive value must report it to HMRC within 60 days (VCM36040).
Part two: is the investment worth the risk?
8. What is the valuation, and what does the cap table look like?
The pre-money valuation and the share price set what fraction of the company your money buys. Ask for the full capitalisation table: founders, earlier investors, any option pool and any convertible instruments that will turn into shares later. It doubles as your check on the 30% test. Tax relief does not change the price you pay; it changes your net cost.
9. How much more money will you need, and what will that do to my stake?
Most start-ups issue several rounds of shares, and each one reduces the percentage you own; new shares can also carry rights yours lack, such as a fixed dividend (FCA risk summary). As an illustration, if the next round issues new shares making up 25% of the enlarged company, a 2% stake falls to 1.5%. Ask how long the money will last, what the next round is expected to be, and whether existing shareholders will have a right to take part.
10. What will I be told, and how often?
You will probably be unable to sell for years, so information is the only way to follow your money. Ask what reporting is promised in writing: annual accounts, regular updates, notice of new funding rounds and of anything that could affect SEIS status. Check whether there is a shareholders’ agreement and which decisions need investor consent.
11. What happens if it goes wrong, or goes well?
The FCA’s risk summary says the likeliest ways to get money back are a sale of the business or a stock market listing, events that are not common, and that start-ups rarely pay dividends. Ask the founder what a realistic exit looks like and how long it might take. If the company fails, SEIS loss relief softens the blow; our loss relief guide shows by how much.
The checklist
| Question | Why it matters | What to ask to see |
|---|---|---|
| Advance assurance? | HMRC’s view that the shares are likely to qualify | HMRC’s letter and the application it was based on |
| Within the SEIS limits? | Relief depends on the company qualifying at issue | Latest accounts, headcount, incorporation and first trading dates |
| Qualifying trade? | Excluded activities can disqualify the company | Business plan and a description of every activity |
| Use of funds? | Money must go on the qualifying activity within three years | Budget for the round and expected SEIS1 date |
| Risk to capital? | No protection or pre-arranged exit is allowed | Articles of association and any side agreements |
| Your connection? | Employees and holders above 30% cannot claim | Cap table, including associates |
| Three-year compliance? | A breach withdraws relief from investors | Who monitors, and how investors will be told |
| Valuation and dilution? | Sets your stake and what later rounds do to it | Pre-money valuation, option pool, funding plan |
| Information rights? | You are unlikely to be able to sell, so reporting is your main window | Shareholders’ agreement or articles |
Our sister title SEIS Investments publishes a longer list of investor due diligence questions and a due diligence guide. If a pitch promises returns or pushes you to decide quickly, read our guide to spotting an investment scam before going further.
