Impact of state aid on SEIS and EIS

📘Overview

State aid can have a significant impact on how much investment a company can raise under the SEIS or EIS schemes.

Understanding how different forms of government support are classified ensures that you don’t unintentionally exceed the limits imposed by HMRC and EU-aligned rules.

🔍 What Is State Aid?

State aid refers to any advantage or benefit provided by a government to certain businesses on a selective basis. The purpose of these rules is to prevent unfair competition across the EU (and the UK still aligns with these principles in some areas).

State aid can take many forms, such as:

• Grants or subsidies
• Favourable loans
• Tax reliefs or breaks

💡 Many government support schemes offered during the Covid-19 period counted as state aid, including Innovate UK Smart Grants.

Not all public funding qualifies as state aid, though. When in doubt, the grant provider should confirm whether their scheme is classified as state aid.

State aid rules exist to:

• Maintain fair competition
• Encourage investment in innovation and growth
• Protect both businesses and consumers

🔗 HMRC guidance: What is State Aid?

🧾 Types of State Aid

There are two main types relevant to most startups and scale-ups:

1. De Minimis State Aid

• Considered too small to distort competition.
• Businesses can receive up to €200,000 (around £150,000) in total over a rolling three-year period.
• Typical examples include small business grants or regional support schemes.

2. Notified State Aid

• Larger or more significant aid that has been formally approved (“notified”) by the European Commission.
• Covers all state aid that is not classed as De Minimis.

💡 The General Block Exemption Regulation (GBER) simplifies the approval process for certain types of notified aid, such as:

• SME investment funding
• Research and development (R&D) and innovation support
• Environmental protection and sustainability initiatives
• Local infrastructure improvements

🔗 More on GBER: GOV.UK guidance

💡 SEIS and State Aid

The Seed Enterprise Investment Scheme (SEIS) is itself treated as De Minimis state aid.

This means that the £150,000 SEIS investment cap must take into account any other De Minimis state aid received in the three years before the SEIS investment.

Example

💡 If you’ve received grants from Innovate UK or other public bodies, check whether they were De Minimis before planning your SEIS round.

💡 EIS and State Aid

The Enterprise Investment Scheme (EIS) is classed as Notified state aid, and it operates under the General Block Exemption Regulation (GBER).

EIS allows companies to raise up to:

• £5 million per year, and
• £12 million in total over the company’s lifetime (higher limits apply for Knowledge-Intensive Companies (KICs)).

However, if your company has received any Notified state aid in the three years before your EIS investment, that amount reduces your available EIS limit on a pound-for-pound basis.

Example

If your company received £250,000 of Notified state aid (for example, Innovate UK funding), your available EIS limit would reduce to £4.75 million for that three-year window.

🔗 HMRC Venture Capital Schemes Manual – VCM2040

✅ Quick Summary

💡 If you’ve received any public funding in the past three years, always check how it affects your SEIS/EIS capacity before applying.