The most expensive SEIS mistakes are made before the money arrives: issuing shares before HMRC has given an opinion, pitching the raise as low risk, and submitting the SEIS1 compliance statement too early or with thin evidence. Most of them can be avoided if you know the order of events. This guide walks through eight errors we see founders make, what the HMRC rules say, and how to sequence the raise so your investors get the relief they were promised.

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Price & Accountants supports SEIS and EIS schemes, including share structure guidance for early-stage investors.

TL;DR

Table of Contents

Why SEIS mistakes are so costly

The Seed Enterprise Investment Scheme exists to make very early-stage companies easier to fund. Your investors get income tax relief and, in some cases, capital gains relief. In return, you carry the compliance. HMRC’s guidance is blunt: tax reliefs will be withheld or withdrawn from investors if the rules are not followed for at least three years after the investment.

That is the real cost. A mistake rarely hurts the company directly. It hurts the angel who wired you £20,000 on the strength of a relief you could not deliver, and that angel is the person you will want to back your next round.

As a reminder of the headline limits, a 2026 summary of SEIS thresholds puts the company-side limits at under three years of trading, fewer than 25 full-time-equivalent employees, gross assets under £350,000 and a lifetime SEIS raise of £250,000. If you are unsure whether you qualify at all, start with our guide to SEIS eligibility criteria and our explainer on SEIS investment limits.

Four headline SEIS company eligibility thresholds

Mistake 1: Issuing shares before applying for Advance Assurance

This is the big one. Advance Assurance is a discretionary, non-statutory service. You ask HMRC’s Venture Capital Reliefs team whether a planned investment is likely to qualify, and you ask before the shares exist. HMRC’s manual says it aims to respond within 15 working days for simple cases and 40 for complex ones.

If shares are already issued, HMRC states it will not give an assurance. The company must go straight to the statutory route and submit the compliance statement, with no pre-approved opinion behind it. That is legal. It is also exposed, because your investors’ relief now rests on HMRC’s view after the money has moved.

The fix is simple: build the 15 to 40 working days into your timetable. Tell investors the shares will be issued once the assurance letter arrives. Our founder’s guide to SEIS Advance Assurance covers what to put in the application.

Mistake 1: Issuing shares before applying for Advance Assurance — overview diagram

Mistake 2: Treating a signed term sheet or ASA as harmless

Money often arrives before the paperwork is ready. Founders take cash under an advance subscription agreement (ASA) and assume the tax position will sort itself out later. It may not. An ASA that looks like a loan, for example one that carries interest or can be refunded, can create problems for the relief. Before any investor transfers money, check the terms against the scheme rules. We explain the pitfalls in advance subscription agreements for UK founders and investors.

Mistake 3: Pitching the round as safe

SEIS is built for genuine, high-risk, early-stage ventures. HMRC applies a risk-to-capital test, and its manual lists disqualifying arrangements as a reason to refuse an assurance. A deck that stresses capital preservation, asset backing or a near-certain return invites exactly that scrutiny.

This catches founders who have written a persuasive investor document without thinking about the tax reader. Warning signs include:

Write the information memorandum as you would for a sophisticated angel: real risks, real upside, no comfort language. Then check that the same story appears in the application.

Mistake 4: An over-engineered share structure

HMRC’s VCR team can refuse an assurance where it suspects a structure is built for tax advantage rather than growth. That is most likely when share classes are complicated or investors hold unusual rights. The practical advice is to keep it plain: standard ordinary shares, no special preferential rights, unless you have a clear commercial reason and advice to back it.

The order in which you create classes, allot shares and file forms also matters. We set out the sequence in four SEIS share structure steps to complete before the SEIS3.

Mistake 5: Filing the SEIS1 too early (or without proof)

After the shares are issued, the company must send HMRC a compliance statement on form SEIS1 before it can authorise investor certificates. The timing rule trips people up. HMRC’s manual says the statement cannot be submitted until the company has traded for at least four months, or has spent at least 70% of the money raised by that share issue.

Three practical points follow:

  1. The test applies to each share issue, so a second tranche has its own clock.
  2. Keep bank statements and invoices that show where the money went. If you cannot evidence the spend, you cannot rely on it.
  3. Do not hand out SEIS3 certificates until HMRC has authorised them. HMRC’s research notes a penalty of up to £3,000 may apply for fraudulent or negligent issuing of certificates.

Our SEIS compliance statement guide walks through the SEIS1 field by field.

Mistake 6: Forgetting the 70% rule when moving to EIS

Many startups raise SEIS first and then an EIS round. Here is the trap: if you have previously raised SEIS funds, you must have spent at least 70% of that money before EIS shares are issued. Founders who treat the two schemes as separate often discover this when the next investor’s lawyer asks for evidence.

Plan the runway so the SEIS money is genuinely deployed, and keep the paper trail from day one. If you are heading towards a larger round, read what startups need to secure for EIS Advance Assurance before investors start asking.

Mistake 7: Thinking Advance Assurance lasts forever

An assurance letter is not a guarantee. It is HMRC’s opinion on the facts you supplied. If the business model changes, you introduce a new share class, or the trade shifts, the assurance can cease to be reliable unless HMRC has been told. And the compliance obligation does not end at issue: investors need the conditions kept for the three-year qualifying period.

Practical habits that help:

Mistake 8: Ignoring the founders’ own position

SEIS is about the company and the investors, but founder circumstances can still affect a raise. Overseas founders relocating to the UK often have two projects running at once: the company set-up and the immigration route. If you are on or applying for a visa as a founder, take immigration advice in parallel. For example, this guide to Innovator Founder visa requirements sets out what that route involves. Keep the two timelines visible, because a delayed share issue or a delayed visa can each move the other.

A safe order of events

If you remember one thing, make it the sequence:

  1. Confirm eligibility and your remaining SEIS headroom.
  2. Settle a simple share structure and an honest investor document.
  3. Apply for Advance Assurance and wait for the letter.
  4. Issue shares and receive the funds.
  5. Spend the money on the qualifying trade and keep evidence.
  6. File the SEIS1 once four months of trading or 70% spend is met.
  7. Issue investor certificates only after HMRC authorises them.
  8. Keep the conditions in place for three years.

Our perspective

We have completed start-up processes for over 20 clients, and the pattern is consistent. SEIS rarely fails because the idea is poor. It fails because a founder with a friendly angel in the room moves fast, takes the money, and treats the tax paperwork as something for later. By then the options have narrowed.

Our advice is to treat the Advance Assurance letter as the start line, not an optional extra. Build the timeline around it, tell your investors what to expect and when, and keep the books clean enough that the 70% spend can be proved in an afternoon. Good records are boring, and they are what protect an investor’s relief and your reputation with the next one.

The founders who raise Series A smoothly are usually the ones whose seed round left no loose ends.

— Rahamut

Getting support with your raise

If you are planning a SEIS or EIS round, we can help with the share structure, the Advance Assurance application, the SEIS1 and the day-to-day bookkeeping that proves your spend. Our published plans start at £249 per month for Core Services, with the Blue Plan at £549 per month and the Black Plan from £1,999 per month. See the pricing page or our wider accounting and tax services. If you need a senior voice on forecasts and funding, ask about our virtual finance director service.

FAQ

Can I apply for SEIS Advance Assurance after issuing shares?

No. HMRC states it will not give an advance assurance where the shares have already been issued. You would submit the compliance statement under the statutory procedure instead, without a pre-approved opinion.

How soon can I file the SEIS1?

Only once the company has traded for at least four months, or has spent at least 70% of the money raised by that issue. Whichever happens first is enough. Each share issue is tested separately.

Does Advance Assurance guarantee my investors get relief?

No. It is HMRC’s view on the information you provided. If the facts change, or conditions are broken within the three-year period, relief can be withheld or withdrawn.

Do I need to have spent SEIS money before raising EIS?

Yes. If you previously raised SEIS funds, you need to have spent at least 70% of them before issuing EIS shares, and you should be able to evidence that spend.

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