What can I spend the investment on?
📘 Overview
This article explains how your company must use funds raised under the Seed Enterprise Investment Scheme (SEIS) or Enterprise Investment Scheme (EIS). These schemes offer valuable tax reliefs to investors, but in return your company must follow specific rules about how the money is spent. This helps HMRC ensure the investment genuinely supports early-stage business growth.
💡 Key Conditions
Use in a Qualifying Trade
Funds must be used for a qualifying trade or to prepare to carry out one.
This can include activities such as research and development (R&D) or work directly linked to getting the business up and running.
Examples include:
- Early product research
- Market testing
- Activities required to begin trading (for example, regulatory preparation or initial tooling)
Spend Within 3 Years
All money raised under SEIS or EIS must be fully spent within three years of receiving it.
The spending must clearly support your company’s operations, growth and development. This means the funds cannot be used to repay loans, distribute dividends, or cover costs that do not contribute to building the business.
Growth and Development
Under EIS the spending rules are tightly drawn, and the funds must be used only for growth and development, whereas under SEIS there is a wider remit for general operating costs. In practical terms, this means the EIS funds should be used for new staff members, marketing and advertising costs, or new equipment, whereas SEIS can also be used to fund existing working capital and operating costs.
🔍 Examples of Qualifying Use
Activities that qualify
- Product development and testing
- Hiring staff to grow or strengthen operations
- Expanding into new markets (for example, early marketing or localisation work)
- Developing technology or intellectual property (IP)
Activities that do not qualify
- Repaying existing debts
- Paying dividends
- Acquiring another company
Summary of Key Points
- Funds must support a qualifying trade or preparation for one.
- All SEIS/EIS money must be spent within three years.
- EIS funds must be strictly for growth and development, whereas SEIS has a wider remit.
- Spending must directly contribute to growth, not financial restructuring or shareholder returns.
- HMRC may withdraw reliefs if funds are used incorrectly, so clear documentation is important.