A SEIS compliance statement is essential for businesses seeking tax relief under the Seed Enterprise Investment Scheme (SEIS). Issued by HMRC, this statement confirms that your company meets the eligibility criteria for SEIS funding, allowing your investors to benefit from significant tax incentives.
For early-stage businesses, securing a SEIS compliance statement is critical in attracting investment and ensuring tax-efficient fundraising. This guide explains what this statement is and how it can benefit your business.
Understanding the SEIS compliance statement: what it means for your business
The SEIS compliance statement is more than just paperwork. It’s an essential confirmation from HMRC that your business qualifies for the SEIS. This document plays a crucial role in helping your investors claim their SEIS tax relief, making it a vital step in securing funding for your business.
Who can submit the SEIS compliance statement?
The compliance statement can be submitted by:
- The company secretary
- A director
- An authorised agent
If you choose to work with an agent, ensure they provide a signed letter dated within the last three months confirming their authority to act on your behalf. This will add flexibility and ensure the process is handled professionally.
If you’re looking for expert support, we are here to help.
How a SEIS compliance statement helps your business attract investors
Investors are naturally drawn to businesses prioritising SEIS compliance because of the tremendous tax reliefs they receive. These include:
- 50% income tax relief on their investment
- Capital Gains Tax exemption on profits from SEIS shares
- Loss relief to mitigate investment risks
- 100% inheritance tax exemption after two years
- Capital gains reinvestment relief of 50% on tax paid on other investments if reinvested in a SEIS company
Securing a SEIS compliance statement enhances your business’s credibility and improves your chances of raising capital. Investors prefer ventures that have already met compliance requirements, reducing uncertainty and making the investment process seamless.
Key eligibility criteria for SEIS compliance
| Criteria | Requirement |
| Years Trading | The company must have been trading for less than three years. |
| Gross Assets | Cannot exceed £350,000 at the time of investment |
| Employee Count | Fewer than 25 full-time employees |
| Trading Activity | Must be a qualifying trade (excluding financial services, property development, etc.) |
| Investment Cap | Can raise to £250,000 under SEIS |
Meeting these eligibility requirements is essential for SEIS compliance. Having a comprehensive SEIS/EIS compliance checklist can help ensure your business meets all necessary criteria before application, saving you time and potential complications.
Timelines and deadlines: When to apply for your SEIS compliance statement
Timing is crucial when applying for the SEIS compliance statement. To avoid unnecessary delays and ensure a smooth funding process, here’s what you need to know:
When to apply for the SEIS compliance statement
- After issuing shares: You can only apply for the SEIS compliance statement after issuing shares to investors.
- Application deadline: The application must be submitted within two years from the end of the tax year in which the shares were issued.
- SEIS before EIS: Understanding the key differences between SEIS vs EIS can help determine which scheme best suits your business at its current stage. However, You must apply for SEIS before EIS, as a company that has already raised funds through EIS cannot later qualify for SEIS. However, if your business does not meet SEIS requirements from the outset, you can apply for EIS directly.
Conditions to meet before applying
Before submitting the compliance statement, your company must meet at least one of the following conditions:
- Business activity: Your company or a qualifying 90% subsidiary must have carried out the qualifying trade for at least 4 months.
- Use of funds: At least 70% of the funds raised by the share issue must have been spent.
Additionally, you must submit a separate compliance statement for each share issue.
Understanding these timelines and requirements ensures your business stays on track and compliant, helping you secure the funding you need without delays.
How to apply for a SEIS compliance statement
Once your business is ready and meets the necessary SEIS criteria, the next step is to apply for your SEIS compliance statement. Understanding the complete SEIS or EIS application process can streamline your fundraising journey. This is a crucial step in securing tax relief for your investors, and following the correct procedure is key.
Step 1: Prepare the necessary documentation
Providing the correct supporting documentation is essential when applying for the SEIS compliance statement. Whether you’ve received seis/eis advance assurance or not, the right paperwork will ensure your application is processed smoothly.
If you have advance assurance
If you’ve already received Advance Assurance, you must submit updated documents reflecting any changes since the initial approval. This ensures your business still meets the SEIS criteria.
If you don’t have advance assurance
If you haven’t received advance assurance, you’ll need to submit the following documents:
- Outline your future financial outlook by providing a business plan or a pitch deck.
- Provide your most recent financial statements.
- An explanation of how your company meets the risk to capital condition, which investors rely on for tax relief eligibility.
- Detail your planned business activities and expected expenditure.
- Submit the most recent copy of you memorandum and articles of association.
- Include any documents being used to attract investors.
- List any agreements between your company and its shareholders.
- List prior investments and venture capital schemes.
- Provide a detailed list of the investors requiring the SEIS tax certificate.
- Submit the latest Share Register.
- Any other materials proving your business qualifies for SEIS.
Ensuring all documents are complete and accurate helps you meet HMRC’s requirements and improves your chances of securing investment.
Step 2: Complete the SEIS1 Form
Next, you’ll need to fill out Form SEIS1. This form is used to apply for the compliance statement, and you can complete it online through the government website.
Step 3: Submit Your Documents
After completing the form, submit your application through HMRC’s online service for review.
Following these steps ensures your business remains compliant with SEIS, helping you secure the funding you need while giving investors the confidence to invest.
What happens after you receive your SEIS compliance statement?
If HMRC agrees with your application
Once HMRC confirms that all conditions have been met, they will:
- SEIS approval letter: A letter of approval, known as the SEIS2, which includes a Unique Investment Reference (UIR) number for the share issue. Investors need this number to claim tax relief.
- Issue SEIS3 form: A blank compliance certificate must be completed for each investor to confirm their eligibility for SEIS tax relief.
You must complete the SEIS3 certificates using the UIR and promptly distribute them to your investors. They will use these documents to claim their tax relief.
Maintaining SEIS Compliance
Your work doesn’t end with receiving the compliance statement. To ensure your investors retain their tax relief and your business stays SEIS-compliant, you must follow the scheme’s rules for at least three years after the investment.
This includes spending the raised funds on:
• Preparing to carry out a qualifying trade
• Research and development for a qualifying trade
Failing to comply with these rules could result in HMRC withdrawing the tax relief from your investors, so maintaining compliance is critical.
If HMRC disagrees
If HMRC decides the conditions for SEIS have not been met, they will:
- notify you in writing with the reasons for their decision.
- guide how to appeal their decision.
Staying compliant and completing all required documentation efficiently will protect your investors’ tax benefits and uphold your business’s reputation with HMRC.
Common mistakes to avoid when filing for SEIS compliance
Applying for a SEIS compliance statement can be straightforward if you avoid these common pitfalls:
- Issuing shares too early: Don’t issue shares before receiving advance assurance (if applicable), as this can invalidate your SEIS eligibility.
- Issuing shares without receiving the payment: Ensure investors have paid for their shares before issuing them.
- Not meeting trading criteria: Ensure your business carries out a qualifying trade. Activities like property development or financial services are excluded.
- Incomplete or incorrect forms: Double-check your SEIS1 form and supporting documents for accuracy to avoid delays or rejection.
- Exceeding the SEIS investment limit: SEIS allows you to raise to £250,000. Claims beyond this limit won’t be accepted.
Avoiding these mistakes is key to securing your SEIS compliance statement without unnecessary delays or complications. Partnering with our expert team ensures your application is precise, fully compliant with HMRC guidelines, and set up for success, minimising the chances of rejection or setbacks.
FAQs about SEIS compliance for early-stage businesses
1. Can I apply for SEIS compliance before issuing shares?
No, shares must be issued to investors before you can apply for SEIS compliance.
2. How long does HMRC take to process SEIS compliance applications?
HMRC usually takes 4-6 weeks to review your application, although delays may occur if additional details are needed. This timeline changes frequently so check with a professional if you’re working to a specific timescale.
3. Can my business qualify for both SEIS and EIS?
Yes, your business can qualify for both schemes, but SEIS funding must be applied for and completed before moving on to EIS.
4. What happens if my SEIS application is rejected?
You can amend and resubmit your application with the necessary corrections and additional supporting documents.
How Can We Simplify the SEIS Compliance Journey?
Navigating the SEIS compliance process doesn’t have to be overwhelming. At Rise Accounting, we make it simple by:
- Ensuring your business meets all HMRC eligibility criteria.
- Preparing and submitting accurate SEIS1 forms.
- Managing all communication with HMRC on your behalf.
- Helping you secure faster approval and attract tax-conscious investors.
Book a call today to start your SEIS compliance journey!
