How to apply for SEIS: eligibility, advance assurance, share issue, compliance statement

Applying for the Seed Enterprise Investment Scheme comes down to four main steps: confirm your company qualifies, ask HMRC for advance assurance, issue the shares to your investors properly, and submit the compliance statement. This is the order I work through with clients, using a step-by-step guide and three checklist documents (A to C). Only four steps, but each one has to be done properly, because the scheme is administered by HMRC and the shares are governed by company law at the same time.

The order matters. The most common mistake I see is a founder who has already taken an investor's money and issued the shares, and only then starts asking whether the company qualifies. At that point there is no advance assurance to fall back on and no chance to restructure before the shares went out. Doing the steps in sequence avoids that.

SEIS eligibility criteria (step 1)

• Step 1: make sure your company meets the criteria. Before anything else, check that your company is one that can actually benefit from the scheme. Document A breaks this down into the five main things that allow a company to qualify:
• Can your company actually use the scheme?
• What will you do with the money?
• Is your business carrying on a qualifying trade?
• Does your company meet the risk-to-capital condition?
• Will you issue compliant shares?

Each of those five is a separate question. The first is about the company itself and whether it is the kind of company the scheme is open to. The second is about what the investment will be spent on. The third is about what the business actually does, since not every trade qualifies. The fourth, the risk-to-capital condition, is a test HMRC applies to the investment itself, and the checklist sets out what it looks at. The fifth is about the shares you intend to issue and whether they meet the scheme's requirements.

Work through the checklist honestly. If you cannot satisfy yourself on each of the five, there is no point moving to the next step until you have fixed the problem. In my experience, founders are usually confident about the trade and the use of money and far less sure about the risk-to-capital condition and the shares, so give those two the most attention.

SEIS advance assurance (step 2)

• Step 2: apply for advance assurance. This step is optional, but I highly recommend it. Advance assurance is where your company sends information to HMRC and asks whether, if you made a formal application, HMRC believes it would approve your company for the scheme.

The benefit is twofold:

• Reassure investors. A positive response from HMRC is something you can show to potential investors before they commit.
• Get feedback early. If HMRC gives a negative response, meaning you would not qualify, at least you have that feedback and can try to improve the company's position where possible, rather than finding out after the shares have been issued.

To complete this step, use document B, which is a checklist of the documents and information you will need to have available to submit to HMRC. Once you have gathered it, go to the government's advance assurance page, click start now and submit the application.

I put this step before approaching investors for a practical reason. Investors in early-stage companies are often relying on the relief as part of their decision, and a founder who can show HMRC's positive view in writing has a much easier conversation than one who can only say they expect to qualify. It also fixes the facts you have told HMRC, so you know what the company needs to look like when the shares are actually issued.

Issue SEIS shares to investors (step 3)

• Step 3: issue the shares and onboard the investors. This is the step where the investors' money comes in and the shares go out, and it is the one that founders most often rush. Two sets of rules apply here. First, the scheme's own rules about the shares, which are listed in document A. Second, the Companies Act, which has specific procedures that must be followed when issuing shares.

In practice, that means:

• holding a board meeting and keeping board minutes;
• passing a shareholder resolution, if one is needed;
• issuing share certificates to the investors;
• updating the company's internal statutory registers; and
• submitting the relevant documents and information to Companies House.

Getting the SEIS side right but the company law side wrong is a real risk, because the scheme requires compliant shares and the shares are only properly issued if the Companies Act procedure has been followed. Board minutes record that the directors approved the allotment. A shareholder resolution may be needed to give the directors the authority to allot. The certificates and the registers are the company's own evidence of who holds what, and the Companies House filing is the public record of it. Miss any of them and you have an investor who has paid for shares the company cannot properly show it issued. The procedure for creating and issuing a class of shares is set out in how to create different classes of shares.

SEIS compliance statement (step 4)

• Step 4: apply with a compliance statement. This is the formal application to HMRC, made after the shares have been issued. Document C tells you two things: whether you are in a position to apply yet, and if so, what documents and information you need to give HMRC. That information will be very similar, and in many cases the same, as the information you used for advance assurance.

Very briefly, you can only apply to HMRC with a compliance statement if at least one of two conditions is met:

• you have carried on the qualifying trade for at least four months; or
• you have spent at least 70% of the money you raised.

Until one of those is true, hold off. The compliance statement is what allows HMRC to issue the certificates your investors need to claim their relief, so it is in everyone's interest to get it in once you are eligible. Because the information overlaps so heavily with the advance assurance application, keep that file organised. Most of the work for step four is already done by the time you reach it, provided you kept the advance assurance submission and note anything that has changed since.

Keep founder control with share classes

When onboarding investors you might want to issue them a different kind of shares, known as a different class of shares, so that you keep more control over the company. For example, as founder you may want to retain as much control as possible, so you might want the investors' shares to carry fewer voting rights than yours.

That is a common position for a founder raising a seed round from several small investors: you want their money and their support, but you do not want every decision to need a vote from people who are not involved day to day.

If so, you will need to create a new class of shares, and usually that is done by amending the company's articles of association. Make sure any such class still meets the scheme's requirements for compliant shares before you issue it, since the voting rights are a company law choice but the other features of the shares are constrained by the scheme.

Next steps

Start with the eligibility checklist and be rigorous about it, before any money changes hands. If the company qualifies, apply for advance assurance before you go to investors, then issue the shares following the Companies Act procedure, and submit the compliance statement once you have traded for four months or spent 70% of the money. If you want investors on a separate share class, speak to a corporate solicitor about amending the articles first, and take tax advice on the scheme itself. The checklists do the heavy lifting on eligibility, but whether the relief is ultimately available to your investors depends on the facts of your company, and that is a question for your tax adviser as much as your solicitor.