Combining SEIS and EIS: Structuring a dual round

Raising investment through both the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) in the same round can allow you to take advantage of both tax incentives that help you attract investors, and raise beyond the standard SEIS limits.

However, combining both SEIS and EIS in a single round also introduces added risk; if you handle it incorrectly, you risk voiding SEIS tax relief for investors. 

That’s why, as a founder, you should understand why a dual round might be necessary, where the traps are, and how to execute it in a way that protects yours and your investors eligibility.

Why do a dual round?

When fundraising, many companies may find that their needs fall in the middle ground between SEIS and EIS eligibility. You might be looking to raise more than the £250k SEIS fundraising limit, but still want early investors to benefit from the generous 50% tax relief. 

Under EIS, companies can raise up to £12 million over their lifetime (and up to £5 million in any single year), or as much as £20 million if they qualify as a Knowledge Intensive Company (KIC). 

The available tax relief under EIS is 30% - still a strong incentive for investors - but those backing very early-stage businesses may expect the higher 50% SEIS relief, which better reflects the level of risk they’re taking on. 

When your funding target goes beyond the £250k SEIS limit, you can combine both schemes within a single funding round - that’s where a dual SEIS/EIS round comes in.

For example, if you’re raising £500k, only half of that would qualify for SEIS tax relief. The remainder would then be eligible for 30% tax relief under EIS for investors. 

By structuring this as a dual round, you can run one campaign, with investors subscribing under both schemes - £250k under SEIS and £250k under EIS.

This approach helps you to: 

• Attract a wider range of investors - some may specifically look for investments under SEIS, whilst others will be less fussy.
  • Some investors may have also used their SEIS allocation limit, but still want to invest (and benefit from tax incentives).
• Keep momentum - rather than running two separate funding rounds, you can close both schemes within a single campaign.
• Maintain consistency - investors can come in on the same valuation and terms, avoiding the need for unnecessary duplicate documentation.

However, it’s important to handle the timing and processing of these investments correctly. 

HMRC requires that all SEIS shares are issued before EIS shares. If you issue both on the same day, or fail to separate the funds properly, you could accidentally invalidate SEIS eligibility for all investors in that round.

This could be detrimental to your investor relationship, and the funds they commit.

That’s why careful sequencing and clear communication with investors is critical when managing a dual SEIS/EIS raise.

Where do founders get confused (and what’s the risk)?

Running a dual S/EIS round can be complex, and there are a few common pitfalls founders make that could jeopardise investment tax relief, scheme eligibility, and investor satisfaction.

One of the biggest risks to SEIS eligibility is timing. 

SEIS shares must always be issued first, and SEIS and EIS cannot be issued on the same day. 

If you issue EIS shares first, or even at the same time, the SEIS shares will become ineligible, and your investors will no longer be able to access their SEIS tax relief.

Other common areas to smooth out include: 

• Allocation fairness vs simplicity - do you choose to allocate SEIS relief to early investors and EIS to later investors (first-come, first-served), or to split each investor’s amount evenly across both schemes?

If you choose the latter, you’ll need to remember to receive two different payments (one for SEIS, and one for EIS), and issue two lots of shares, each clearly prescribed to their allotted SEIS or EIS investment.

Both are valid choices, but must be communicated clearly to set investor expectations - some may feel disgruntled if they only receive 30% tax relief whilst other investors receive 50% for the same investment round.

However, many investors are familiar with the processes involved with claiming SEIS and EIS, and will accept that there is only so much SEIS available!

• Documentation and the flow of funds - investors must clearly know which part of their investment qualifies under which scheme, and funds need to be received and processed separately.

• Eligibility criteria - both SEIS and EIS each have their own qualifying rules around trades, investor profiles, company age, size, and other criteria. Overlooking these differences can lead to non-compliance and loss of relief.

Want to see if your business might be eligible? Check out our quiz.

Keeping a tight handle on sequencing, paperwork, and communication will help you protect your investors’ relief, and your company’s credibility during the fundraising process.

How to structure the round correctly

Here are some clear actions you can take to help protect the tax relief for your investors and give yourself a clean path to follow.

1. Decide the allocation method

As already mentioned, you have two main choices: 

• First come, first served: 
  The earliest investors fulfilling the first £250k will receive SEIS relief, and the remaining investors will invest under EIS.
  
  Operationally, this is the simpler option, but the later-joining investors may feel that they’re getting a poorer deal under the same terms, especially if the time disparity between investments is slim.
  
  
• Pro-rata split: 
  Each investor’s commitment is split into an SEIS portion and an EIS portion (for example, in a £500k round, you’d allocate each investment as 50% SEIS and 50% EIS). 
  
  This created the same deal for all investors, but will require more calculation and communication, especially if the ratio is more obscure and investment amounts vary.

In this case, you’ll still need to separate our SEIS and EIS share issuance. If you have 10 investors, for example, you’ll have 20 issuances.

Choose the method that best fits your fundraising plans and timeline, and ensure all investors and advisors are on board with these terms before committing. 

2. Fund flow and correct share issuance sequencing 

This is a critical section - mistakes here could void relief. 

• Ensure all documentation is signed by all parties before proceeding, to ensure everything can be processed in the correct order.
  
  
• Once you’re satisfied with the documentation, collect and process the SEIS funds first. It could help to instruct investors to only transfer the SEIS portion (if their investment is split across both schemes).
  
  
• Confirm receipt and issue SEIS shares. Mark each SEIS investment as received and issue share certificates for the SEIS portion. 
  
  
• Pause: Once the SEIS portion of your investment has completed, remember to wait at least one full business day before starting to process EIS.
  
  
• After the delay, you can now collect and process the EIS portion of the total investment. Mark the receipt of the EIS shares and issue the respective share certificates for that portion.

To ensure all the documents are processed correctly, you must remember to issue the correct share certificates that correlate to that portion of the investment. 

Where investors split their investment across both schemes, the SEIS3 and EIS3 documentation must be processed separately and for each particular portion of the investment.

To summarise

Raising through a dual S/EIS round can give you more investor appeal and more flexibility, but it demands precision. The tax reliefs are likely to be big incentives for the investors, and jeopardising this will have an effect on your credibility as a founder. 

Remember these four things: timing, allocation, documentation, and communication. Get those right and you maximise your chance of a smooth round.

Secure SEIS and EIS with InVestd

Navigating S/EIS eligibility requirements can feel daunting, but you don’t have to go it alone.

With InVestd Raise, we guide you through every step, from confirming your eligibility and preparing the right documents, to submitting your applications and handling all ongoing correspondence with HMRC. 

Our team and platform help you to follow the correct process, protect investor relief, and keep your round fully compliant.

Let us help you unlock the benefits of S/EIS. Book a call today to see how we can make your fundraising journey as seamless as possible.