EIS vs SEIS vs VCT: a comparative analysis

Unravelling the complexities of EIS, SEIS, and VCTs, their eligibility criteria and tax benefits for investors, is critical to making more informed investment decisions in the patient capital early-stage investing sector.

Investing in startups and early-stage companies can offer lucrative opportunities for investors, but comes with its fair share of risks. To mitigate these risks and incentivise investment in promising ventures, governments around the world have introduced various investment schemes. In the UK, three prominent schemes are the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), and Venture Capital Trusts (VCTs). In this blog post, I will delve into a comparative analysis of these schemes, highlighting their differences in eligibility criteria, tax benefits, and investment focus.

Comparing company eligibility criteria 

There are some key requirements for a company to be eligible for investment in any of these three structures.  Below we discuss the main eligibility criteria. 

In order for a company to qualify for EIS investment it must:

  • be unquoted and have gross assets of £15 million or less before the investment and not more than £16 million immediately after investment.
  • have fewer than 250 full-time equivalent employees.
  • be a “qualifying trade” as defined by HMRC (and outlined in the VCM manual), and cannot be involved in certain excluded activities like dealing in land, financial services, or legal services.

For a company to qualify for SEIS investment it must be:

  • gross assets must be £350,000 or less, and fewer than 25 full-time equivalent employees.
  • trading less than three years and must not have received investment under any other venture capital scheme.

VCTs are investment vehicles listed on the London Stock Exchange.  VCTs hold at least 70% of their funds in qualifying unquoted companies or AIM-listed companies. In order for a company to become part of a VCT portfolio it must:

  • qualify as eligible for VCT investment, i.e., meet the eligible trade qualifications per HMRC’s Venture Capital Schemes manual. 
  • The money raised should be used for the growth and development of the investee companies.

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