SEIS compliance: how to make sure your investors get their tax relief

Raised with SEIS? Congratulations! The slog of raising the money is over but there’s still some more work to do for your investment: SEIS compliance.

It’s unlikely you’ll forget this important step in your SEIS fundraising – your new investors will remind you because they need documents from your company to prove their investment was eligible for SEIS tax relief.

But don’t wait for investors to nudge you – stay ahead of the game by submitting your SEIS compliance promptly. In this post, we explain SEIS compliance: how to complete the SEIS compliance statement and send investors the certificates they need to claim tax relief.

Contents

• A quick introduction to SEIS
• When to send your SEIS compliance statement
• 5 steps to SEIS compliance
• Follow the rules for 3 years to stay SEIS compliant
• Investors claim SEIS tax relief in their tax returns
• How to do SEIS compliance on SeedLegals
• After SEIS: moving on to EIS
• Talk to an expert

A quick introduction to SEIS

The Seed Enterprise Investment Scheme (‘SEIS’) is a UK government scheme designed to encourage entrepreneurship and investment in seed-stage businesses.

If an investment in your company is likely to qualify for SEIS – which you can prove with SEIS Advance Assurance – you’re more attractive to investors. This is because in exchange for investing in your company, the government offers them enticing tax breaks.

Need more detail? Head over to our guide to SEIS

When to send your SEIS compliance statement

After you’ve received your SEIS funding and issued shares to your investors, you’ll need to fill in a compliance statement (SEIS1) and send it to HMRC.

But you can’t send your compliance statement immediately after you’ve issued the shares. HMRC will only accept your compliance statement when you’ve carried out your qualifying business activity for at least four months, and spent at least 70% of the amount you raised.

5 steps to SEIS compliance

1. Wait until the right time

You must wait to send HMRC your compliance statement until you’ve carried out your qualifying business activity for at least four months, and spent at least 70% of the amount you raised.

2. Complete SEIS1 compliance statement

You can fill in the form online at this gov.uk page, but it’s much easier to use SeedLegals to generate it for you

As part of your application, you’ll need to submit supporting documents such as the Memorandum and Articles of Association.

Already got SEIS Advance Assurance? Great – you won’t need to re-submit evidence that you’re eligible for the scheme (pitch deck, financial projections etc) unless something has significantly changed since you applied for Advance Assurance.

If you haven’t got Advance Assurance: That’s OK, Advance Assurance isn’t obligatory. But as part of the compliance process, you’ll need to submit proof that you meet the requirements for SEIS. The main supporting documents you’ll need to submit are:

• Business plan and financial forecasts or your pitch deck and other fundraising materials
• Up-to-date financial projections for the next three years
• Details about your company’s trading and activities (this can be in the pitch deck)
• Explanation about how you meet the ‘risk to capital’ condition (this is also usually included in the pitch deck)
• Up-to-date Memorandum and Articles of Association

3. Submit your documents

Send your compliance statement and supporting documents to:

[email protected]

or by post to:

Venture Capital Reliefs Team
WMBC
HM Revenue and Customs
BX9 1BN

If you raise again with SEIS, you’ll need to do another compliance statement.

4. HMRC sends you forms SEIS2 and SEIS3

HMRC will review your documents and you can expect an answer within two to four weeks.

To confirm the investment in your company qualifies for SEIS, HMRC will send you:

• SEIS2
  This is a letter containing your Unique Investment Reference (UIR) number for this share issue. Your investors need the UIR to claim their tax relief.
• SEIS3
  This is a blank SEIS compliance certificate – when you’ve filled it in for each of your investors, it’s their proof that their investment is eligible for SEIS tax relief.

5. Fill in SEIS3 certificates and send to your investors

SEIS3 certificates show the Unique Investment Number HMRC assigned to the shares for this SEIS investment. Each investor needs an SEIS3 certificate to claim their tax relief from the government.

When you do your SEIS Compliance on SeedLegals, we automate the process of filling in these certificates, so you can generate them in a few clicks.

Then send each of your new investors their individual SEIS3 certificate. If you’ve done your SEIS compliance with SeedLegals, you can easily send each investor their certificate via SeedLegals.

Follow the rules for 3 years to stay SEIS compliant

HMRC can withhold or withdraw tax relief for your investors if you don’t follow the SEIS rules for at least three years after their investment.

The rules state you must spend the money you raised from the SEIS investment within three years of the date you issued the shares. And you must spend the money on:

• a qualifying trade, or
• preparing to carry out a qualifying trade, or
• research and development that’s expected to lead to a qualifying trade

The SEIS rules in full are at the gov.uk website.

Investors claim SEIS tax relief in their tax returns

Your investors will claim their tax relief when they fill in their annual self assessment tax return. On the Additional Information page, under ‘Other tax reliefs’, investors enter the total they’ve invested in companies under SEIS and EIS.

Investors can claim SEIS tax relief up to five years from 31 January of the year after the tax year in which they made the investment. (It’s 31 January because that’s the deadline for online self assessment tax returns.)

What if your investor is employed, paid by PAYE and doesn’t have to file a tax return? They need to fill in pages 3 and 4 of the SEIS3 certificate and post them to the HMRC address stated on their payslip and P60.

There’s a ‘carry-back’ option when filing for SEIS tax relief – this allows investors to claim tax relief for their Income Tax in the previous year, as well as in the same year they made the investment. For SEIS, investors can carry back up to £200,000 per tax year (before April 2023, this limit was £100,000).

How to do SEIS compliance on SeedLegals

Sorting out SEIS1 and SEIS3 forms used to be complicated and time-consuming. We’ve automated the manual form-filling so when you do your SEIS funding round on SeedLegals, the SEIS compliance is incredibly simple. We auto-generate and pre-fill the forms for you to sign and send.
Here’s how to complete your SEIS compliance on SeedLegals:

1 – Generate SEIS1 form

• Get started
  Log into SeedLegals and go to Raise > SEIS/EIS Compliance
• Fill in the quick questionnaire
  There’s hint text to guide you. If you get stuck, hit the button to start a chat with our SEIS experts.
• Upload the relevant documents
  Follow the instructions on-screen.
• Get your compliance statement reviewed
  Our experts review your statement and documents before you submit them, so you can be confident you’ll get a speedy approval.

2 – Send to HMRC

Download the compliance statement pack from SeedLegals and send by email:

[email protected]

or by post:

Venture Capital Reliefs Team
WMBC
HM Revenue and Customs
BX9 1BN

3 – Send SEIS3 certificates to your investors

When you receive the SEIS2 letter from HMRC confirming the investment is approved for SEIS:

• Log into SeedLegals
  Go to Raise > SEIS/EIS Compliance
• Generate SEIS3 certificates
  Follow the instructions to enter the Unique Investment Reference number and the SEIS3 certificates will be automatically generated.
• Send certificates
  No need to send individual emails attaching the certificates – simply click to share the SEIS3 certificates with your investors via SeedLegals.

Find out more about how to complete your SEIS compliance on SeedLegals.

After SEIS: moving on to EIS

If you’re successful in growing your company after your SEIS funding round, you might move on to fundraise through EIS, the Enterprise Investment Scheme.

SEIS and EIS have similar rules and benefits for companies and investors, but EIS is for slightly larger companies and reflects the reduced risk for investors.

To see how the criteria for EIS compare to SEIS, take a look at our guide, SEIS vs EIS.

Talk to an expert

Got questions about SEIS? Our funding experts know SEIS and EIS inside out. Book a free call to get answers to your SEIS questions, fast.