Common Mistakes to Avoid When Preparing Your EIS & SEIS Application in 2025

For UK startups, the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) offer valuable incentives by attracting investors through tax relief benefits. However, applications for EIS and SEIS are detail-sensitive, and even minor mistakes can result in delays or rejections. Knowing the pitfalls and mistakes to avoid when preparing your EIS & SEIS can streamline the application process and ensure the best chances for success.

Here’s a list of common mistakes to watch out for when preparing your EIS & SEIS application in 2025:

1. Failing to Understand What is EIS and SEIS

One of the most common mistakes applicants make is misunderstanding what EIS and SEIS entail. The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) are designed to encourage investment in early-stage businesses by offering tax relief to investors. However, these schemes have specific requirements that businesses must meet to qualify.

Not understanding the purpose of EIS and SEIS or assuming that all startups are eligible can lead to confusion and wasted time. Take time to read the HMRC guidelines on what constitutes EIS and SEIS eligibility.

This foundational knowledge ensures that you only proceed with the application if your business genuinely qualifies, saving time and resources.

2. Neglecting Preliminary Qualifications

Before diving into the application, ensure that your company meets all the preliminary qualifications. For SEIS, your business must be under two years old, while EIS allows up to seven years of trading for knowledge-intensive companies. Furthermore, your business must not have raised more than £150,000 under SEIS or over £12 million under EIS.

Overlooking these fundamental criteria often leads to rejection. Check for any restrictions on the type of business or industry, as some sectors, such as finance and property, are generally ineligible. Conducting a qualification check at the outset will prevent any setbacks and help clarify whether EIS or SEIS suits your business.

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3. Submitting Incomplete Documentation

A major reason for EIS and SEIS delays is incomplete documentation. HMRC requires several key documents, including a detailed business plan, financial projections, and evidence of qualifying trades.

Missing information slows down the process, as HMRC will likely request additional documents or clarification.

Creating a checklist of required documents can ensure that nothing is overlooked. For example, include a copy of the articles of association, relevant financial records, and investor pitch decks if available. Make sure that every document is up-to-date and accurately reflects your company’s current position. Providing complete documentation shows that your business is organised and prepared, which can lead to faster approval.

4. Overestimating Financial Projections 

Investors and HMRC pay close attention to your financial projections. Overly optimistic forecasts are a red flag, as they indicate that your business may not have realistic expectations. While it’s natural to want to present your company in a positive light, inflated projections may lead to rejection or even penalties if the business underperforms.

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Instead, offer balanced and realistic figures that are backed by market research and a clear growth strategy. This not only reassures HMRC of your business’s legitimacy but also builds trust with potential investors. Consistency across your financial documents is crucial to present a coherent and credible business model.

5. Ignoring EIS & SEIS Application Timelines

Each step of the EIS and SEIS application process has specific timelines, and delays can cause frustration or loss of interest from potential investors. Start preparing your application well before you need the funding, allowing enough time for revisions and any necessary resubmissions. Remember that initial SEIS applications can take around eight weeks, while EIS approval may take even longer.

If you’re under time pressure, consult a specialist early on to expedite the process and reduce the risk of delays. Being aware of these timelines helps manage expectations and allows for smoother planning.

6. Failing to Establish Investor Interest

Applying for EIS and SEIS without investor interest is a common misstep, as these schemes are most effective with investors lined up. Having investors show initial interest can help focus the application and prove the business’s potential in a competitive market. Plus, this interest demonstrates demand for your shares, which is attractive to HMRC.

Consider networking within your industry or engaging with potential investors before finalising the application. Once investors have expressed interest, you can tailor the application to reflect their input, increasing the chances of approval and making it easier to attract more funding once certified.

7. Not Consulting a Legal or Tax Professional

Overlooking the role of professional advice is a frequent mistake. While you might be familiar with the basics of EIS and SEIS, a tax advisor or legal expert with experience in these schemes can catch issues you may miss. From eligibility requirements to business planning, professionals can provide valuable insight to ensure your application meets HMRC standards.

Investing in professional advice can streamline the process and prevent costly mistakes. Working with an advisor can also save you time by ensuring your application is complete and accurate, preventing potential roadblocks that could delay funding approval.

8. Overcomplicating the Business Model

A straightforward, easily understood business model is essential for both HMRC and potential investors. Overcomplicating your business model or adding excessive jargon may raise questions and delay approval. Instead, focus on making the application as clear as possible.

Describe what the business does, how it generates revenue, and its target market without unnecessary detail. A transparent model allows HMRC to evaluate your business accurately, while investors will appreciate the clarity, which can be crucial in the early stages of funding.

9. Misunderstanding Use of Funds

One requirement of the EIS and SEIS schemes is that funds raised should be used exclusively for business growth. Using funds to repay debts or for personal expenses is prohibited and can lead to disqualification from the scheme.

Outline your intended use of funds within the application, focusing on areas such as product development, marketing, or team expansion. A clear explanation of how funds will contribute to business growth strengthens your application and helps demonstrate that the capital will be effectively employed to benefit the company.

10. Ignoring Post-Investment Compliance

Even after receiving EIS or SEIS approval, compliance is crucial. Businesses must adhere to specific conditions to maintain eligibility, including a minimum holding period for shares and restrictions on company changes.

Neglecting compliance responsibilities can result in penalties or disqualification, affecting both you and your investors. Familiarise yourself with ongoing requirements and be prepared to submit annual updates as needed. Regular compliance ensures that your business retains its EIS or SEIS status, preserving investor tax reliefs and protecting your relationship with them.

11. Skipping the Advance Assurance Step

Advance Assurance is a service offered by HMRC that allows you to confirm your eligibility for EIS or SEIS before submitting a full application. Many startups overlook this step, which can lead to wasted effort if they discover later they are not eligible.

Applying for Advance Assurance provides peace of mind for both you and your investors, as it shows HMRC’s initial approval. This step can be especially useful when approaching new investors who may feel more comfortable investing in a business that has undergone preliminary vetting by HMRC.

12. Not Regularly Updating the Application

As your business grows, so may changes in structure, finances, or strategy. Keep your EIS or SEIS application up-to-date with any material changes. Failing to update the application with relevant details can risk approval and reduce investor confidence. Regular updates show that your business is stable and fully transparent.

Final Thoughts 

Securing EIS or SEIS approval can provide a major funding boost for your business, but preparation is key. By avoiding these common mistakes and thoroughly reviewing your application, you’ll strengthen your chances of success. A careful approach ensures your business is well-positioned to attract investors and achieve growth through these valuable schemes.