Funding1-2 weeksMedium

How to Prepare Your Company Accounts for SEIS/EIS Investment

Step-by-step guide to getting your company's financial house in order before raising SEIS or EIS investment. Covers accounting housekeeping, qualifying trade checks, share structure, and valuation.

What You'll Need

Up-to-date accounting software or bookkeeping records
Bank statements for all company accounts
Articles of association
Latest filed accounts at Companies House
Corporation Tax registration and UTR
Details of all shareholders and share classes

Step-by-Step Guide

Bring your bookkeeping up to date

Investors and HMRC will both need accurate financial information. Make sure all bank transactions are reconciled, all invoices (sales and purchases) are recorded, payroll is up to date if you have employees, and all receipts are filed. If you have been using spreadsheets, consider moving to proper accounting software before the fundraise.

Tips

•Reconcile every bank account to the penny - discrepancies raise red flags with investors
•Clear out any director's loan account balance or document it clearly
•Make sure inter-company transactions are properly recorded if you have multiple entities
•If you have been mixing personal and business expenses, separate them before the investment round

Verify your gross assets position

For SEIS, your gross assets must be under £350,000 immediately before the share issue. For EIS, the limit is £15 million before and £16 million immediately after. Calculate your gross assets by adding up all assets on your balance sheet: cash in bank, equipment, inventory, debtors, intellectual property, and any other assets. Do not deduct liabilities - it is gross assets, not net assets.

Tips

•The gross assets test catches many companies by surprise - it includes everything, even cash you plan to spend soon
•For SEIS, if you have £200,000 in the bank and £100,000 of equipment, you are already at £300,000 before the investment
•Timing matters - the test is at the moment immediately before shares are issued, so plan accordingly
•If you are close to the SEIS threshold, consider whether spending on qualifying activities before the share issue would bring you under

Review your qualifying trade status

Go through the HMRC excluded trades list and confirm that your company's primary activity is not on it. If you have multiple activities, check that excluded activities make up less than 20% of overall trade. Document your reasoning clearly, as HMRC will scrutinise this during the advance assurance and compliance stages.

Tips

•If your trade is ambiguous (e.g., a property tech company vs property development), prepare a clear explanation of why it qualifies
•Revenue split is not the only measure - HMRC also looks at time spent, assets used, and overall character of the business
•If you plan to pivot into a different area, consider whether the new trade will still qualify
•Keep evidence of your trading activity: contracts, invoices, product screenshots, customer testimonials

Clean up your share structure

Review your existing share structure and make sure it is compatible with SEIS/EIS. The shares issued to investors must be new ordinary shares with no preferential rights. Check that your articles of association allow for the type of shares you plan to issue. If you need to create a new share class for investors, do this before the fundraise.

Tips

•SEIS/EIS shares must be full-risk ordinary shares - no guaranteed returns, no preferential dividends, no preferential rights on winding up
•It is fine to have different share classes (e.g., A ordinary and B ordinary) as long as the investor shares carry genuine risk
•Anti-dilution provisions in shareholder agreements can be complex - get legal advice on whether they affect SEIS/EIS qualification
•If you have outstanding convertible loan notes, understand how their conversion will affect the share structure and connected person tests

Establish a defensible company valuation

HMRC does not prescribe how to value your company for SEIS/EIS purposes, but the valuation must be reasonable. Common approaches for early-stage companies include the cost-to-build method, comparable transactions, and discounted cash flow. The share price offered to investors should reflect a genuine commercial negotiation.

Tips

•Keep documentation of how you arrived at the valuation - HMRC may ask
•For pre-revenue companies, the cost-to-build approach (development costs incurred) is often the most defensible
•Market comparables are useful if there are genuine comparable transactions in your sector
•An artificially low valuation to maximise investor relief percentages could trigger HMRC scrutiny

Prepare management accounts and financial projections

Create up-to-date management accounts (profit and loss, balance sheet, cash flow) and financial projections for at least 2 years. These will be needed for the advance assurance application, investor due diligence, and demonstrating that the company is a genuine commercial venture.

Tips

•Management accounts do not need to be audited, but they must be accurate and internally consistent
•Include a clear breakdown of how the SEIS/EIS funds will be spent
•Show monthly cash flow projections so investors can see the runway the investment provides
•If you are pre-revenue, make assumptions explicit and base them on evidence where possible

File any outstanding Companies House and HMRC returns

Make sure all statutory filings are up to date before approaching investors. File any overdue annual accounts, confirmation statements, Corporation Tax returns, and VAT returns. Outstanding filings signal poor governance and may cause problems with the advance assurance application.

Tips

•Check your Companies House filing history online - any late or missing filings will be visible to investors
•If you have missed a Corporation Tax filing deadline, file it immediately and pay any penalties
•Register for Corporation Tax if you have not already done so - this is required within 3 months of starting to trade
•If your SIC code is wrong or outdated, update it at Companies House to match your actual trading activity

Prepare your data room for investor due diligence

Organise all company documents into a logical data room structure that investors can review. Include your incorporation documents, articles of association, shareholder agreements, board minutes, management accounts, financial projections, business plan, customer contracts, IP assignments, employment contracts, and advance assurance letter when received.

Tips

•A well-organised data room signals professionalism and speeds up the investment process
•Make sure all IP created by founders and contractors has been formally assigned to the company
•Include board minutes showing key decisions, especially around share issues and director appointments
•Remove any confidential information that is not relevant to the investment (e.g., specific customer pricing)

Common Mistakes to Avoid

Not calculating gross assets correctly - it is gross (total) assets, not net assets after deducting liabilities

Failing to separate personal and business transactions before investor scrutiny

Having outstanding Companies House or HMRC filings that signal poor governance

Not assigning intellectual property to the company formally, which can create problems during due diligence

Frequently Asked Questions

Why do investors want to see company accounts before investing via SEIS/EIS?

Investors review accounts to verify your company meets the qualifying conditions for SEIS/EIS, particularly the gross assets test and trading status. Clean, well-prepared accounts demonstrate professionalism and make it easier for investors to complete their due diligence.

What is the gross assets test for SEIS and EIS?

For SEIS, your company's gross assets must not exceed £350,000 immediately before the investment. For EIS, the limit is £15 million before investment and £16 million after. Gross assets include everything the company owns, including cash, equipment, and intellectual property.

Do I need audited accounts for SEIS/EIS investment?

No, most small companies qualifying for SEIS do not need audited accounts. Unaudited accounts prepared in accordance with FRS 102 or FRS 105 (micro-entities) are sufficient. However, some investors may request additional assurance such as an accountant's review.

How should I categorise R&D spending in my accounts for SEIS/EIS?

R&D expenditure should be clearly identified in your accounts, either capitalised as an intangible asset or expensed through the profit and loss account. Clear categorisation helps demonstrate that SEIS/EIS funds are being used for the qualifying trade and supports any R&D tax relief claims.

What accounting period should my accounts cover for an SEIS/EIS application?

Your accounts should cover the most recent complete accounting period up to the date of your application. If your company is newly incorporated, even management accounts showing the current position are helpful. HMRC and investors want to see the most current financial picture possible.

Related Guides

How to Apply for SEIS Advance Assurance

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How to File an SEIS1 Compliance Statement

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