A question I get frequently asked is: "How do I structure SEIS-eligible deals within a UK venture capital fund?" The answer depends on your fund vehicle, your investor base, and the specific qualifying conditions your portfolio companies must satisfy. To structure SEIS-eligible deals in a UK VC fund, most managers use a discretionary portfolio where each investor owns shares directly through a nominee, invest only in companies meeting HMRC’s SEIS conditions, obtain advance assurance before investing, and track compliance until SEIS3 certificates are issued.Here is my guidance for the key considerations.
The Seed Enterprise Investment Scheme (SEIS) enables qualifying UK companies to raise up to £250,000 from investors who receive up to 50% income tax relief, capital gains tax exemption, and loss relief. For a deal to qualify within your fund, the investee company must meet all HMRC conditions at the point of share issue and throughout the three-year holding period.
These conditions include trading for fewer than three years, having fewer than 25 employees, holding gross assets below £350,000, and carrying out a qualifying trade. As we explored in our free download A Guide to SEIS and EIS Advance Assurance for UK Funds, obtaining HMRC advance assurance before investment closes gives your investors confidence that tax reliefs will be honoured.
SEIS funds are not limited partnerships in the traditional sense. They operate as a collection of individual bare trusts held under a nominee arrangement, with the Financial Conduct Authority (FCA)-authorised investment manager making discretionary decisions on behalf of each investor. At Sapphire, we structure SEIS and EIS funds so that each investor is the sole beneficiary of their bare trust, preserving direct ownership of the underlying shares required for HMRC compliance.
This structure differs from a GP/LP fund, where investors hold interests in a partnership rather than direct equity. Choosing the correct vehicle at the outset determines whether your investors can claim the tax reliefs that make SEIS attractive. According to HMRC's 2026 official statistics, 2,430 companies raised a total of £276 million under SEIS in the 2024-to-2025 tax year, a 14% increase from the previous year.
The risk-to-capital condition, introduced in 2018, requires investee companies to demonstrate objectives for long-term growth and that the investment carries significant risk. Your fund documentation, including the Information Memorandum (IM) and application forms, must reflect these requirements. We covered regulatory and compliance obligations in more detail in our post on What Slows First-Time Fund Managers at Launch.
Disqualifying arrangements are another area where fund managers must exercise particular care. HMRC will disqualify shares issued in consequence of arrangements whose main purpose is to secure tax relief rather than genuine commercial activity. Every deal in your portfolio must have a demonstrable commercial rationale independent of the tax incentive.
SEIS funds cannot rely solely on professional advisers to confirm eligibility. Each investee company has the option to apply to HMRC for advance assurance before shares are issued. Our portfolio companies work with specialist advisers, such as our affiliate company Sapphire Business Advisers, throughout this process, from preparing the application through to responding to HMRC follow-up queries.
As noted by RW Blears in their 2024 analysis of integrating S/EIS provisions into corporate deals, the advance assurance process is a non-statutory service offered by HMRC on a discretionary basis, making thorough preparation essential.
Post-investment compliance is where many fund managers encounter difficulty. The investee company must submit an SEIS1 compliance statement to HMRC each time it issues SEIS shares, and must have spent at least 70% of the funds raised or traded for at least four months before doing so. Only after HMRC issues the SEIS2 confirmation can the company distribute SEIS3 certificates to your investors, enabling them to claim their tax reliefs.
If any qualifying condition is breached during the three-year holding period, HMRC may claw back tax reliefs. Our article on Budget Watch 2026: Pre-Budget Briefing for EIS and SEIS covers possible upcoming changes that may affect ongoing compliance obligations. Fund managers should also be aware that the updated investment limits for EIS were introduced in April 2026; the annual EIS limit rose to £10 million (£20 million for Knowledge Intensive Companies) and the lifetime limit to £24 million (£40 million for Knowledge Intensive Companies) which may affect your fund's broader strategy when combining SEIS with follow-on EIS rounds, or even non-EIS investments.
Structuring SEIS-eligible deals within a UK VC fund requires careful attention to fund vehicle design, HMRC eligibility, and ongoing compliance. Getting these decisions right from the outset protects your investors' tax reliefs and your fund's credibility. For bespoke guidance tailored to your fund objectives, contact the team at Sapphire Capital Partners.
How much can a company raise under SEIS?
A qualifying company can raise up to £250,000 in total under SEIS. Individual investors can invest up to £200,000 per tax year and may claim 50% income tax relief, subject to their personal circumstances. Tax treatment depends on individual circumstances and may change in the future.
Can a SEIS fund be structured as a limited partnership?
Not if investors want SEIS relief. Relief is only available where investors hold shares directly, so SEIS funds are normally structured as discretionary managed portfolios, with shares held by a nominee and each investor as the beneficial owner. In a GP/LP fund, investors hold an interest in the partnership rather than the shares themselves.
Is SEIS advance assurance compulsory?
No. Advance assurance is a voluntary, non-statutory service from HMRC, but most fund managers and investors expect it before committing capital. HMRC received 4,085 SEIS advance assurance applications in 2025 to 2026 and had approved 76% of them at the time its statistics were published.
When can investors claim SEIS tax relief?
Only after the company has traded for at least four months or spent at least 70% of the money raised, submitted an SEIS1 compliance statement, and received HMRC’s authorisation to issue SEIS3 certificates. Investors then use the SEIS3 certificate to claim relief through their tax return.
Can a company raise EIS investment after SEIS?
Yes, and many SEIS funds plan for follow-on EIS rounds. From 6 April 2026, a company can raise up to £10 million a year under EIS (£20 million for knowledge-intensive companies), with a lifetime limit of £24 million (£40 million for knowledge-intensive companies). Different limits may apply to some Northern Ireland companies.