SEIS, EIS, and MVP Development: What UK Founders Need to Know

If you are a UK founder raising early-stage investment, SEIS and EIS tax relief schemes can make your company significantly more attractive to investors. Understanding how they work, and how they intersect with your MVP development, can give you a meaningful advantage when fundraising.

What are SEIS and EIS?

The Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) are UK government programmes designed to encourage investment in early-stage companies by offering tax relief to investors.

SEIS (Seed Enterprise Investment Scheme)

• For: Very early-stage companies (under 3 years old, fewer than 25 employees, under £350,000 in gross assets)
• Investment limit: Companies can raise up to £250,000 through SEIS
• Investor benefits: 50% income tax relief on investments up to £200,000 per tax year. Capital gains tax exemption on profits from SEIS shares. Loss relief if the company fails

EIS (Enterprise Investment Scheme)

• For: Early-stage companies (under 7 years old for most sectors, fewer than 250 employees, under £15m in gross assets)
• Investment limit: Companies can raise up to £5m per year, £12m lifetime
• Investor benefits: 30% income tax relief on investments up to £1m per tax year. Capital gains tax deferral. Loss relief

In practical terms: if an investor puts £100,000 into your SEIS-qualifying company, they get £50,000 back in income tax relief. That makes your startup a substantially better bet from their perspective.

Why this matters for your MVP

The connection between SEIS/EIS and MVP development is direct:

• SEIS/EIS makes fundraising easier. Angel investors and early-stage funds actively seek SEIS/EIS-qualifying companies because of the tax advantages. Having SEIS advance assurance before you approach investors signals that you are organised and investable.
• MVP development is often the primary use of SEIS funds. Most SEIS raises are specifically intended to fund product development. Investors want to see their money go toward building a working product that validates the business model.
• A launched MVP strengthens your EIS raise. Once you have a working product, traction data, and early users from your SEIS-funded MVP, you are in a much stronger position to raise a larger EIS round.

How to structure your MVP raise

Here is a practical approach to combining SEIS/EIS with MVP development:

1. Get SEIS advance assurance first

Before raising money, apply to HMRC for SEIS advance assurance. This is not a guarantee, but it gives your investors confidence that the tax relief will apply. The application is free and typically takes 6-8 weeks. You can apply online through the HMRC portal.

2. Raise your SEIS round

With advance assurance in hand, raise your seed round. For many startups, the SEIS limit of £250,000 is sufficient to fund an MVP build and initial go-to-market activities. Common SEIS round sizes for MVP development are £50,000 to £150,000.

3. Build and launch the MVP

Use the funds to design, build, and launch your MVP. A well-scoped MVP typically costs £15,000 to £80,000 depending on complexity, leaving funds for marketing, operations, and runway.

4. Demonstrate traction

With a live product, focus on acquiring early users and gathering data. User numbers, engagement metrics, revenue (even small amounts), and retention rates are all evidence that your product has market demand.

5. Raise EIS for growth

With a proven product and traction data, raise a larger EIS round to fund growth. The EIS limit of £5m per year gives you significant room to scale.

Qualifying criteria to watch

Not every company qualifies for SEIS/EIS. Key requirements include:

• Trade requirement. Your company must be carrying out a qualifying trade. Most technology businesses qualify, but some sectors (financial services, property development, legal services) are excluded.
• Independence. Your company must not be controlled by another company. If you have a corporate parent, you may not qualify.
• UK permanent establishment. Your company must have a permanent establishment in the UK, though it can trade internationally.
• Spending requirement. At least 70% of SEIS/EIS funds must be spent on qualifying business activity before the next round (or within a set time window, typically 2-3 years).
• Risk-to-capital condition. The company must have a genuine intention to grow and develop, not merely to preserve capital.

Always consult with a qualified accountant or tax adviser before relying on SEIS/EIS for your fundraising strategy. The rules are specific and the consequences of getting it wrong are significant.

How development costs interact with SEIS

MVP development costs are a qualifying use of SEIS funds. This includes:

• Design and prototyping
• Software development
• Cloud infrastructure and hosting
• Testing and quality assurance
• App store fees and deployment costs

Having clear invoices and documentation for your development spend is essential for SEIS/EIS compliance. A reputable development partner will provide detailed, itemised invoices that your accountant can work with.

Working with Shacksolutions

We work regularly with SEIS/EIS-funded startups and understand the constraints and timelines involved. We can provide detailed quotes and phased invoicing that works with your funding structure. If you are planning a SEIS raise and want to understand what your MVP will cost, book a free strategy call and we will help you plan a budget that works for both your investors and your product.