Before you approach a single investor, your company needs to pass a set of statutory qualifying tests. Get one wrong and investors who subscribe cannot claim the 50% income tax relief that makes SEIS attractive, which means the round may unravel after the money has been received. This checklist works through every company-side test in order, with worked examples for the cases that routinely trip founders up. It is company compliance guidance, not investment advice, and every threshold links to the HMRC source.
Does your company qualify for SEIS? The short answer
To issue SEIS shares your company must: (1) have raised no more than £250,000 in total under SEIS across its entire life; (2) have gross assets of no more than £350,000 at the time of the investment; (3) employ fewer than 25 full-time-equivalent people; and (4) be within three years of starting to trade. All four tests must be met at the moment shares are issued. Failing any one of them disqualifies the round.
Test 1: the £250,000 lifetime raise cap
A company can raise a lifetime total of £250,000 under SEIS, not £250,000 per round. If you raised £150,000 in a first SEIS round, you have £100,000 of SEIS capacity remaining. Once the lifetime total reaches £250,000, SEIS is closed to that company forever, even if it later returns to a very early stage of a new product line.
A common misreading is to treat the cap as applying per tax year or per funding round. It does not. The £250,000 is a company-level aggregate across all time.
Note that the SEIS £250,000 company cap is entirely separate from the EIS company limits (up to £5m per year and £12m over the company's lifetime under EIS), and also separate from the investor-side cap of £200,000 per tax year under SEIS. Keep these three numbers strictly apart: they operate on different dimensions.
Test 2: gross assets no more than £350,000 at the time of investment
The gross-assets test is measured at the moment of investment, meaning immediately before the SEIS shares are issued, as confirmed by HMRC guidance. Gross assets means all fixed and current assets at their balance-sheet value (not net of liabilities). Cash counts as an asset.
The timing point is load-bearing. Consider the following example.
Worked example: the gross-assets timing trap
| Scenario | Gross assets immediately before shares issued | Gross assets immediately after round closes | SEIS result |
|---|---|---|---|
| Company A raises £200,000 SEIS; pre-round assets are £280,000 | £280,000 (passes: under £350,000) | £480,000 (would fail if that were the test date) | Pass. The test date is before the round, not after. |
| Company B has pre-round assets of £360,000 (e.g. a patent valued on the balance sheet) | £360,000 (fails: over £350,000) | Not relevant | Fail. The company cannot issue SEIS shares. |
The practical point: if your balance sheet carries significant fixed assets (IP, equipment, prepayments) that push the gross figure close to £350,000 before the cash comes in, check the number carefully before issuing shares. A company that passes the test before the round will almost certainly fail it after, but that does not matter because the statutory test date is the date of issue.
Test 3: fewer than 25 full-time-equivalent employees
The company must have fewer than 25 full-time-equivalent (FTE) employees at the time of investment. The test uses FTE, not headcount. Part-time employees count as a fraction. Founders who are directors and are on the payroll count toward the total.
Worked example: counting FTE correctly
A company has the following people at the date of the share issue:
| Person | Hours per week | Full-time equivalent (based on 37.5 hrs) |
|---|---|---|
| 3 full-time founders (directors and employees) | 37.5 each | 3.0 |
| 18 full-time engineers and product staff | 37.5 each | 18.0 |
| 4 part-time sales and operations staff | 18.75 each | 2.0 |
| 2 part-time contractors engaged as employees | 18.75 each | 1.0 |
| Total | 24.0 FTE |
This company passes the test at 24.0 FTE. If the two part-time contractors were instead full-time, the total would reach 25.0 FTE and the company would fail (the test requires fewer than 25, so 25.0 exactly is a failure). Mapping the precise FTE count before issuing shares is part of the pre-round compliance check.
Directors who are not employees do not automatically count. But founders who draw a salary or are employed under a contract of service are employees for these purposes and must be included in the count.
Test 4: within 3 years of starting to trade
The company must be within three years of starting to trade at the date of investment. The clock starts on the date the company began trading, not on the date it was incorporated. This distinction matters significantly for companies that were incorporated but dormant or pre-revenue for a period before they began genuine commercial activity.
Worked example: the incorporation versus trading-start trap
| Company | Incorporated | Started trading | SEIS share issue date | 3-year test result |
|---|---|---|---|---|
| Company A | January 2021 | March 2024 | July 2026 | Pass. 2 years 4 months since trading start. Still inside 3-year window. |
| Company B | January 2021 | January 2021 | July 2026 | Fail. 5 years 6 months since trading start. Outside the 3-year window. |
If the company has been dormant or in a pre-trading research phase for an extended period, determining the precise trade-start date is worth doing carefully. HMRC's position is that trading begins when a company starts carrying on its trade as a commercial activity, not from the date of the first invoice or the date of first revenue. If you are borderline on this test, get a professional view before issuing shares.
What the investor gets, and why it is your company's job to protect it
An SEIS investor can claim 50% income tax relief on up to £200,000 invested per tax year, a 50% CGT reinvestment exemption on reinvested gains, and a CGT-free disposal of the shares after three years. These are statutory reliefs available to qualifying investors in a qualifying company.
If the company fails any of the qualifying tests at the date of issue, the shares do not qualify, and investors who have already subscribed will find their relief denied or clawed back by HMRC. That outcome damages investor relationships, may trigger contractual warranty claims, and closes the SEIS route permanently. Compliance is a company-side responsibility, not something investors can verify independently: it is the company's directors who make the representations on the SEIS1 compliance statement that triggers relief. That is why the pre-round checklist below matters.
The full pass/fail checklist
| Test | Threshold | How it is measured | Pass / Fail / Flag |
|---|---|---|---|
| Total SEIS raise (lifetime) | No more than £250,000 in total | Aggregate of all previous and current SEIS share issues by the company | Flag to us if prior SEIS rounds reduce the remaining headroom below your target raise |
| Gross assets at time of investment | No more than £350,000 immediately before share issue | All fixed and current assets at balance-sheet value; measured before the cash from the round is received | Flag to us if balance sheet carries significant IP, equipment or cash that pushes the total near £350,000 |
| Number of employees | Fewer than 25 FTE at time of investment | Full-time equivalents including founders on payroll; part-timers and contractors on employment contracts count as fractions | Flag to us if headcount is above 20; FTE mapping required |
| Age of trade | Within 3 years of starting to trade | From the date trading commenced (not incorporation); determined by when commercial activity began | Flag to us if your trade-start date is ambiguous or more than 2 years ago |
| Qualifying trade | Company must carry on a qualifying trade | Most genuine product and technology businesses qualify; excluded activities include financial services, property development, leasing, and professional services (law, accountancy). Check HMRC's excluded-activities list | Flag to us if the company earns any revenue from activities that may be on the excluded list |
| Independence | Not under control of another company; no arrangements to become controlled | The company must not be a subsidiary and must not have arrangements in place by which it will become controlled by another company | Flag to us if any investor will hold more than 50% post-round, or if a strategic investor has control-related rights |
| No prior EIS investment | Company must not have received EIS investment before this SEIS round | If EIS shares have been issued at any point, SEIS is not available. SEIS must precede EIS in the funding journey, not follow it | Flag to us if any prior round used EIS |
| No EIS or VCT investment in same round | SEIS shares in this round must not be issued alongside EIS shares or VCT investment | SEIS and EIS cannot be raised in the same share issue | Flag to us if you plan a hybrid round |
| UK-establishment | Company must be established in the UK | UK-incorporated company, or a non-UK company with a permanent establishment in the UK | Flag to us if the company is incorporated outside the UK |
Source for the core thresholds: HMRC: venture capital schemes, apply to use the Seed Enterprise Investment Scheme.
What to do next: advance assurance before you raise
Advance assurance is HMRC's pre-round clearance for an SEIS (and/or EIS) raise. It is not a legal requirement, but it is the professional standard before approaching investors. Sophisticated angel investors and seed funds will routinely ask whether advance assurance has been obtained before committing to a round. Its absence does not prevent a round closing, but it shifts the risk entirely onto the company's directors.
The advance-assurance application requires a description of the company's activities, its business plan, the proposed share structure, and confirmation of the company's qualifying status. HMRC's turnaround is typically several weeks. Planning to apply before you start investor conversations is good practice.
If any test in the checklist above shows a "flag", or if your situation involves any complexity (part-acquired businesses, pre-trading gaps, borderline gross assets, mixed trading activities), it is worth working through the qualifying position before applying. An advance-assurance refusal can be amended and reapplied, but the process takes time and creates uncertainty in the investor pipeline.
To understand the investor-side relief that your SEIS qualification protects, use the SEIS/EIS relief calculator. For a comparison of when SEIS versus EIS is the right structure for your round, read SEIS vs EIS explained. For the advance-assurance application process in detail, see how to apply for SEIS/EIS advance assurance, and for what happens after the round closes, the SEIS1/EIS1 compliance statement guide covers the post-round filing. If you are at the pre-seed stage and want to understand the broader compliance picture, the pre-seed founders hub is a useful starting point.
To discuss your company's qualifying position before you apply for advance assurance, our SEIS/EIS advance assurance service sets out how we work through the pre-round compliance check and prepare the application.