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What Is The SEIS 2 Year Rule?

Gary Green
Gary Green
January 15, 2020

Does my business qualify for SEIS? And what is the “2 year trading rule” I keep hearing about?

The Seed Enterprise Investment Scheme (SIES) is a fantastic way to raise money for your company. Key Business Consultants was founded as an SEIS specialist firm, and we’ve helped hundreds of businesses over the last six years with their applications.

Today, we’re going to talk about one of the key requirements you will have to demonstrate before you can become eligible for SEIS: the 2 year rule.

How The 2 Year Rule Works

The official name for the rule, on the HMRC paperwork, is the “new qualifying trade” rule. Check out our article on what qualifies as "trading" for SEIS for more information

In simple terms, this means your business either has to be newly set up, or within its first two years of trading. The two-year period applies to both you, and to anyone else who was running the company before you took over. So you can’t use SEIS funding after buying an established company, for example.

If your company has subsidiaries, you’ll need to take their activity into account. From the HMRC website: “Your company, or any qualifying subsidiary, must not have carried out any other trade before you started the new trade.”

If you’re not sure if your business qualifies, HMRC has an advance assurance page where you can find out before you apply. You’ll need to have your basic company paperwork to hand, but it’s probably worth doing; once you get advanced assurance, you can approach your investors with more confidence (and show them the official HMRC statement).

How Is This Different From The 3 Year Rule?

Don’t get the 2 year rule confused with the 3 year rule! The 3 year rule relates to actually spending the money. Within three years of getting the investment, you must spend the money on either:

  • a qualifying trade
  • preparing to carry out a qualifying trade
  • research and development that’s expected to lead to a qualifying trade

The rules for what constitutes a qualifying trade can be found on the HMRC Qualifying Trades page.

What’s The Next Step?

If you’d like to learn more about how the SEIS scheme can help your business raise money, we have plenty more articles on our website.

And if you’d like to discuss the possibility of applying for an SEIS scheme, we would be more than happy to arrange a free, no obligation meeting with you. Our team are experts on all the finer points of SEIS, venture capital and R&D.

We’d love to hear from you, so please get in touch.

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