Does My Business Qualify for SEIS or EIS? Qualifying Trades and Eligibility

A qualifying trade is a genuine commercial trade carried on with a view to making profits which does not consist wholly, or substantially, of excluded activities. Most ordinary trading activities are potentially eligible. The company must also satisfy the scheme’s separate trading-company requirements.

Your Companies House SIC code is a useful starting point, not a decision. HMRC looks at what you sell, how income arises, the contracts, assets and people involved, and the business plan. Changing a SIC code cannot turn an investment business into a qualifying trade.

Potential examples include software development, technology startups, manufacturing, e-commerce selling goods, independent marketing agencies, non-restricted consultancy and food-product businesses. There is no automatic approval for a sector: the operating model matters.

A food manufacturer is different from a farm; a software developer is different from a business collecting fees for acquired intellectual property. Consultancy is not universally eligible: legal and accountancy services are excluded. Check licensing income, financial activities and the activities of subsidiaries before describing any business as qualifying.

HMRC’s excluded-activities guidance includes the following restrictions, subject to detailed definitions and exceptions:

• Dealing and finance: dealing in land, commodities, futures, shares, securities or other financial instruments; dealing in goods outside ordinary wholesale or retail distribution; banking, insurance, money-lending, debt factoring, hire-purchase financing and other financial activities.
• Professional services: providing legal or accountancy services.
• Property development: developing land with a view to making a profit on its disposal. Buying, developing and selling property is not made eligible simply by employing builders.
• Leasing: leasing or hiring assets, including many equipment-rental businesses. The narrow ship-chartering exception has conditions covering registration, ownership, charter arrangements and management; it is not a general exemption for asset hire.
• Land-based activities: farming, market gardening, forestry and timber production.
• Accommodation and care: operating or managing hotels, comparable establishments, nursing homes or residential care homes.
• Industrial and energy activities: coal or steel production, shipbuilding, generating or exporting electricity, making generating capacity available, generating heat or other energy, and producing gas or other fuel. Research and development of generation technology, or manufacturing and selling that technology, is not itself excluded by the energy rules; the actual activity and other exclusions still need checking.
• Royalties and licence fees: normally excluded, with an exception for receipts attributable to relevant IP where the company or an eligible subsidiary created the asset or the greater part of its value. Developing acquired IP may qualify, but the receipts must meet the relevant-intangible-asset rules; ownership alone or a “SaaS” label does not establish eligibility.
• Services or facilities for another business: special rules can exclude their provision to an excluded business where the relevant common-control conditions apply. Selling ordinary services to an unrelated excluded-sector customer is not automatically prohibited.

Buy-to-let, property letting and passive investment generally fail because they are not qualifying trading activities, even before considering specific exclusions. Do not confuse an investment company with an active trading company.

What does “substantial” mean?

Whether excluded activities form a substantial part is a question of fact, considering all relevant circumstances. HMRC’s general approach uses 20% as a practical benchmark, not a statutory turnover test or automatic safe harbour. Assess excluded activities together: turnover, assets, expenses and management time may all matter, and different measures can point in different directions. Keep evidence explaining the whole business rather than relying on one percentage.

• App developer: potentially yes where the company develops and commercialises its own product; review IP ownership and how subscription or licence income works.
• Buy-to-let company: generally no. Holding rental property does not become qualifying simply because it is incorporated.
• Builder: carrying out building works for customers may qualify. Buying land, developing it and selling the finished properties is excluded property development.
• Independent marketing agency: potentially yes for genuine commercial services; examine any related-business arrangements.
• Accountancy practice: excluded, even if small, innovative or using subscription pricing.
• SaaS licensing business: possibly, but assess whether receipts fall within the qualifying-IP exception. Do not assume all software licences qualify.

These illustrate the trade test, not approval of a particular company or share issue.

Review all activities, including non-trading investments and excluded operations. A small qualifying operation does not rescue a company whose substantial activities are excluded. Separating income streams in the accounts helps establish the facts, but does not itself change eligibility.

For a group, HMRC considers relevant activities across the group and applies qualifying-subsidiary rules. Certain subsidiaries using the investment must meet additional ownership conditions. Do not assess only the fundraising parent while ignoring the business beneath it.

No sales or current profits does not automatically prevent qualification. Preparing to carry on a qualifying trade can be eligible, and qualifying research and development expected to lead to a qualifying trade can also qualify under the scheme rules.

Explain what is being developed, the intended commercial trade, milestones and use of funds. A loss-making startup still needs a credible long-term growth objective and genuine investment risk. An indefinite investment-holding arrangement is different from preparing a real trading business.

A qualifying trade is only the first gate. This comparison summarises standard company limits as at October 2026; special EIS rules, including knowledge-intensive and specified Northern Ireland companies, need separate review.

SEIS: early-stage company conditions

Check the trade’s history, not just the incorporation date: predecessor activity can affect the three-year test. SEIS also requires no earlier different trade by the company or qualifying subsidiary. The £250,000 total is not an annual allowance, and relevant de minimis aid can count towards it. The company must not previously have received EIS or VCT investment; plan SEIS before any later EIS issue. Use funds for qualifying business expenditure within three years, not simply to hold investments.

EIS: growth-company conditions and 2026 exceptions

The standard £10 million rolling-12-month and £24 million lifetime limits apply to relevant investments across the risk-finance schemes, not only money labelled EIS. First commercial sale normally starts the seven-year age clock; follow-on funding and certain expansion investments have detailed exceptions. EIS preparatory activity requires the trade to start within two years of investment; funds must support growth, not buy another business.

A specified company has its registered office in Northern Ireland and trades in goods or the wholesale electricity market; not every Northern Ireland company is specified. Its standard EIS limits remain £5 million per 12 months, £12 million lifetime, and £15 million/£16 million gross assets. Energy exclusions still apply. Qualifying knowledge-intensive companies have separate tests, including a usual ten-year age window and fewer than 500 full-time-equivalent employees. From 6 April 2026 their funding caps are normally £20 million per 12 months and £40 million lifetime; specified knowledge-intensive companies retain £10 million/£20 million limits. See HMRC’s current investment-limit guidance before relying on an exception.

The company needs a UK permanent establishment, must not be quoted on a recognised stock exchange, and must meet independence and control requirements. AIM is not a recognised exchange for this test. Check subsidiaries, existing investors and arrangements for another company to take control.

Investment must support genuine growth and development and satisfy the risk-to-capital condition; capital-protection arrangements or guaranteed returns can disqualify it. Shares must be newly issued, fully paid in cash, non-redeemable, full-risk ordinary shares without prohibited preferential rights.

Investors have separate restrictions, including connected-person rules and normally a three-year holding period with continuing conditions. Company eligibility alone does not establish an individual’s tax relief. Take advice on the proposed share rights and investor relationships before issue.

Advance assurance is optional. HMRC can consider whether a proposed investment is likely to meet certain company and investment requirements based on the information provided. It is not a guarantee, an endorsement of the business or confirmation that every investor qualifies.

Prepare an activity breakdown, business plan, forecasts, group structure, funding history and proposed share terms. After investment and the applicable trading or spending conditions, the company submits SEIS1 or EIS1 compliance statements. HMRC authorisation is needed before issuing SEIS3 or EIS3 investor certificates.

For wider setup and compliance, see our new-company accountancy support and limited-company accounting service.