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.

Interested in our services?
Fill in your details and a member of our experienced team will be in touch shortly to discuss your needs.
Contact Form Demo (#1)
We adhere to strict GDPR rules and do not reveal or sell your data to any third-parties. For more, please read our Privacy Policy.
Latest Insights
June 13, 2024
Credit Card Sales Campaign

Originally set up in 2014, HMRC’s Credit Card Sales Campaign was aimed at individuals and businesses...

June 6, 2024
Advice Regarding Tax Litigation

The term “litigation” is used to refer to a tax dispute’s resolution when a statutory appeal...

May 30, 2024
Let Property Campaign

HMRC has looked closely into tax compliance among UK property investors and UK landlords since 2013...

May 23, 2024
What Is A Residence & Domicile Enquiry?

Questions regarding domicile and residence have significant effects on taxes that are payable and due in...

May 16, 2024
Company Tax Investigations By HMRC

If HMRC decides to carry out an investigation into a company’s tax returns, it is important...

May 9, 2024
A Guide To The WDF (Worldwide Disclosure Facility)

More than a hundred countries around the world have made a commitment to exchange information with...

May 2, 2024
Contractual Disclosure Facility And HMRC COP9

Any tax investigation that HMRC carries out can be regarded as serious. However, if you become...

April 25, 2024
A Guide To Managed Service Companies, Personal Services Companies And IR35

Usually, people work as either a self-employed individual or an employee for a business. Nevertheless, there...

April 18, 2024
Criminal Tax Investigations

It is HMRC’s aim to ensure that taxpayers comply with the regulations and law, but HMRC...

View Our latest insights »
Get the latest UK tax & business news and guidance delivered straight to your inbox
Newsletter Form (#2)
We care about the protection of your data. No spam. Unsubscribe anytime.
Copyright © 2022 Key Business Consultants LLP. Reg: E&W OC389322
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram