5 Mins
So: your business is looking for investment, and you’ve got your business plan all drawn up.
You might want to attract investment under the “Seed Enterprise Investment Scheme” (SEIS) and/or the “Enterprise Investment Scheme (EIS). These are government schemes designed to help start-ups and growing businesses attract the investment they need to realise their plans. They work really well – we’ve got considerable expertise in this area across our corporate finance and tax teams and would be happy to discuss your business’s financial needs and whether SEIS and EIS would be a good fit. Further information is provided here.
For SEIS and EIS, HMRC will want to see your business plan/investor pitch deck. Below are a few tips that should help your plan to demonstrate how your business meets the criteria for SEIS / EIS. Following these will give you a good starting point.
1. Show how the business will use the money to grow and develop
What’s the history of the company and what stage is it at now? How will the money be used to take the business forward? Will you create new products? Increase turnover? Enter new geographical or customer markets? Grow staff headcount? Be specific – and spell out how long you expect this to take.
2. Spell out what specifically the money will be spent on
R&D? Marketing? Professional fees? Increased salary costs to grow the business? Include an analysis which matches the total you’re seeking. HMRC may well react unfavourably if the proposed spending is on (a) general running costs, rather than developing the business; or (b) land or buildings, or very high levels of stock, which could be sold if the business folds, thus limiting investor risk.
3. Include the management team
Their background and expertise, and what they bring to the business. HMRC want to see that the funding is for a genuinely entrepreneurial business run by the management team. If there’s any outsourcing of the business, spell out what, why and to whom, and show what will be retained in-house (outsourcing can be a problem).
4. HMRC will want to see that there is genuine risk to investors
Otherwise, why do the investors need the tax relief? Yes, you want your business plan to be attractive, but you need to set out the risks that the business faces and avoid making it look as if there are guaranteed income streams that will limit investors’ risk. It may be helpful to include a comment to the effect that the business is a start-up and therefore by its very nature, investor capital is at risk.
5. Explain any patents or other IP in the plan
If your business will be receiving royalties/licence fees, this can be a problem unless these come from IP you’ve generated “in-house”. You should ensure this is clear from the business plan (and if any of it won’t have been generated in-house, you should show a split).
6. Finally, a few things to avoid
Setting out plans for an exit
SEIS and EIS are intended for businesses with plans to grow and develop over the longer term. If you really must include plans for an exit (top tip: don’t) you should absolutely make sure it’s plain this is just an aspiration, not anything concrete or pre-arranged.
Using the word “partners” when talking about entities you collaborate with
Use an alternative term because SEIS / EIS companies can’t be members of partnerships. Don’t take the risk of HMRC misunderstanding what you mean.
Avoid unnecessary jargon
HMRC need to be able to understand what your business does – e.g. what’s your product? What’s your customer market? What stage is your R&D/business at?
Avoid being overly detailed
Yes, you need sufficient information for investors; but try not to go over the top. HMRC say that the level of detail needed will depend on the business and the amount of investment you’re seeking. Include projections – but these generally only need to cover (say) three to five years, unless your business is particularly slow-burning.
Avoid giving investors kick-backs or benefits for their investment (e.g. future discounts, or gifts)
If you do, it should be clear from the business plan that even in total, these will be minimal.
Get in touch
We’ve got considerable expertise in this area across our corporate finance and tax teams and would be happy to discuss your business’s financial needs and whether SEIS and EIS would be a good fit.
Last Updated on 26 January 2024