Enterprise Investment Scheme (EIS)

You've built a business past the earliest stages: you have a product or service, some customers, and a clear vision for growth. But growth requires capital, and how to raise capital is one of the hardest questions for a founder to answer.

If you're running a company in its growth stage in the UK, the Enterprise Investment Scheme (EIS) could be your most powerful fundraising tool, yet it remains underused, misunderstood, or simply unknown to many ambitious founders.

As fractional CFOs, The FD Consultant works with founders at exactly this stage of their journey, and in our experience, EIS completely changes investment conversations.

Let's break it down.

What is EIS?

The Enterprise Investment Scheme (EIS) is a UK government initiative launched in 1994, designed to encourage private investment into growing businesses.

EIS offers a range of generous tax reliefs to investors who back eligible companies, making it significantly more appealing for them to support your business.

Think of EIS as the bigger sibling of the Seed Enterprise Investment Scheme (SEIS). SEIS is aimed at the very earliest stage of a company's life, whereas EIS is designed for companies past that early phase but still growing, ambitious, and in need of external capital to reach the next level.

If your business is EIS-qualifying, investors who back it can claim 30% income tax relief on their investment.

To put that into perspective, on a £100,000 investment, the investor gets £30,000 back from HMRC. With further capital gains tax relief, investors can claim back even more should the company fail.

So before your company has done anything else, you’ve made investing in it significantly less risky for anyone who meets the criteria to do so.

EIS: the numbers

EIS works on a larger scale than SEIS. Here are the key figures you need to know:

• Investors can put up to £1 million per tax year into EIS-qualifying companies and claim 30% income tax relief. That limit rises to £2 million per tax year if the investment is made in knowledge-intensive companies, which are businesses heavily focused on research and development or the creation of new intellectual property, such as biotech startups or deep-tech innovators.

• Gains on EIS shares held for at least three years are entirely free of Capital Gains Tax (CGT).

• Loss relief means that if the investment falls in value, investors can offset losses against income tax or CGT.

EIS investments can also be used to defer CGT from other gains, a feature that seasoned investors find particularly inviting.

From your company’s perspective, you can raise up to £5 million per year under EIS, and up to a lifetime maximum of £12 million, or £20 million for knowledge-intensive companies.

These are serious sums that can fund genuinely transformative growth.

EIS CGT deferral relief: extra incentive for investors

One of the most valuable but least talked-about features of EIS is CGT deferral relief.

If an investor has recently sold an asset at a profit, they can defer paying CGT on the gain by reinvesting it in an EIS-eligible company.

This is particularly appealing to investors who have sold a business, property, or significant investment and are sitting on a sizeable gain.

By channelling that capital into your company through an EIS, they can defer their CGT bill, sometimes indefinitely.

As a founder, understanding this angle can help you approach the right investors at the right time. A well-timed EIS pitch to someone who has just liquidated an asset can be extremely compelling.

EIS eligibility

At this point, you’re probably wondering if your business qualifies for EIS relief.

EIS qualification has a specific set of criteria, and it’s worth going through them carefully.

Your company must:

• Be unquoted (not listed on a recognised stock exchange, though Alternative Investment Market (AIM) listed companies can qualify).

• Have gross assets of no more than £15 million before the investment and no more than £16 million afterwards.

• Have fewer than 250 full-time equivalent employees, or fewer than 500 for knowledge-intensive companies.

• Be carrying on a qualifying trade. Most trades qualify, but banking, insurance, property development, legal services, and a handful of others do not.

• Have a permanent establishment in the UK.

• Not be more than seven years old from its first commercial sale, or ten years for knowledge-intensive companies.

If you used SEIS to raise your first round of funding, EIS is the natural next step, designed to take you from proof of concept through to serious scale.

Why EIS matters to founders

Let’s be direct: raising investment without EIS in place is simply harder.

When a potential investor knows the government is absorbing 30% of their downside through income tax relief, the conversation changes.

Angel investors who might have hesitated are now willing to write a cheque, and high-net-worth individuals managing portfolios actively seek EIS opportunities for tax planning purposes.

Even institutional investors and family offices use EIS as part of their allocation strategies.

EIS also works particularly well when combined with strong financial storytelling. When a well-structured financial model meets EIS-backed tax relief, you have a genuinely compelling investment case.

Applying for EIS

Like SEIS, applying to use EIS to raise money for your company involves paperwork, but it is worth it. There are two key stages:

Advance assurance

Before you approach investors, you can apply to HMRC for advance assurance that your company qualifies for EIS. While this isn’t mandatory, it is strongly advised, as sophisticated investors will require assurance. Without it, you’re asking them to take a leap of faith that the tax relief will materialise.

Advance assurance tells investors that HMRC has reviewed your company and is satisfied that it meets EIS criteria, which dramatically increases investor confidence and speeds up due diligence.

Compliance statement and EIS3 certificates

Once you have raised the money and deployed it in a qualifying way, you submit a compliance statement to HMRC.

Upon approval, HMRC issues EIS3 certificates, one per investor, which they use to claim their tax relief when filing their self-assessment returns.

Timing matters. Investors cannot claim their EIS tax relief until they receive their EIS3 certificate, so delays in compliance can create friction in your investor relationships. Getting this right and on time is essential.

Common EIS mistakes

Over the years, we’ve seen founders stumble in avoidable ways during the EIS process. The most common pitfalls include:

• Taking investment before obtaining advance assurance. It is much harder to correctly structure things retrospectively.

• Using EIS funds for purposes that don’t qualify, such as acquiring other businesses or repaying shareholder loans.

• Issuing the wrong type of shares. EIS requires ordinary shares that do not carry preferential rights, which can conflict with the preference shares that investors sometimes request.

• Missing the seven-year rule. If your company has been trading for more than seven years, you will no longer qualify for EIS unless you meet the knowledge-intensive criteria.

• Attempting to handle HMRC communications without expert guidance. One incorrect answer on your application can result in delays, rejections, or investors losing their tax relief altogether.

How The FD Consultant helps with EIS

EIS is a prime example of where the fractional CFO model earns its keep. You get senior-level financial expertise, without the cost of a full-time hire, when you need it most.

We use the latest financial and compliance tools to make the EIS process faster, smoother, and more cost-effective for our clients. From digital document management to automated compliance tracking, the right tools mean less time spent on administration and more time focused on what matters: raising capital and growing your business.

At The FD Consultant, we help growing businesses make the most of EIS by:

• Reviewing your eligibility in detail and flagging any issues before they become problems.

• Preparing and submitting your advance assurance application to HMRC.

• Structuring your fundraising round to maximise EIS eligibility and investor appeal.

• Managing all compliance and reporting requirements after the investment is received.

• Issuing EIS3 certificates to investors promptly, so they can claim their relief without friction.

• Integrating EIS planning into your broader financial strategy and growth roadmap.

SEIS and EIS: a powerful pairing

Many growing businesses use SEIS first to raise their initial seed capital, then graduate to EIS for further growth.

SEIS and EIS are designed to work in sequence, and using both at the appropriate stages of your business journey gives you access to some of the most generous investment incentives available.

Investors who backed you under SEIS may well return for your EIS round, and their experience of receiving SEIS tax certificates on time and without hassle will directly influence whether they choose to reinvest.

The EIS bottom line

EIS is one of the most generous and well-constructed investment incentive schemes in the world.

For a growth-stage UK business raising capital, not having EIS in place is essentially leaving money on the table and makes an already difficult fundraising process harder than it needs to be.

Yes, there is paperwork and rules, but the payoff, which is an expanded pool of willing investors, a stronger investment case, and faster fundraising, is substantial.

At The FD Consultant, we make the EIS process easy. We know what HMRC want to see, how to structure your application, and can help you avoid the pitfalls that catch out so many founders.

EIS isn’t just about tax relief; it’s about giving your business the best possible platform to grow.

If you’re thinking about EIS for your next funding round, let’s have a conversation.