A special mini-series from our popular podcast, breaking down EIS, SEIS and VCTs into simple, timeless lessons.
Welcome to EIS & VC Basics, an educational mini-series within our popular The EIS Navigator Podcast. This series demystifies three of the UK’s most important venture capital schemes: the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS), and Venture Capital Trusts (VCTs). Each episode features a discussion with a leading fund manager, alongside our analyst Dr Brian Moretta, one of the most respected voices in UK venture capital.
In the EIS & VC Basics series, we offer shorter episodes discussing how the schemes work, the tax reliefs available, what restrictions there are and how you invest. You can also watch video alongside the usual audio releases, which you can find on our YouTube channel.
We begin with What is EIS?, where we set out the aims of the Enterprise Investment Scheme and why it has been central to funding early-stage UK companies for more than 30 years.
Watch or listen nowAs the series progresses, the EIS and VC Basics episodes explain how these schemes work, what tax reliefs are available, and how both investors and companies can benefit. This page serves as your hub, allowing you to explore all episodes in one place and dive deeper into individual topics when you are ready.
Dive into our EIS and VC Basics mini-series and learn everything you need to know about EIS, SEIS, and VCT investing. Each episode breaks down tax reliefs, company eligibility, fund selection, and investor strategies in short, easy-to-follow segments. Watch, listen, or read transcripts to suit your schedule.
We discuss exits and why they matter to investors. Symvan Capital is building a track record of successful exits. Co-founder Kealan Doyle also has prior experience in capital markets so has lots of knowledge of the different kind of exits, as well as some of the wrinkles that investors need to watch out for.
SyndicateRoom has moved into third-party management, so has good insight into how to pick a fund. Co-founder Tom Britton joins us to give his views on what investors need to look at and how.
We discuss how companies can find the right EIS or VCT manager for investment. Symvan Capital has been investing through EIS for over a decade so has seen what happens when companies handle it well and badly. Investment Manager, Michael Theodosiou, talks us through the angles.
Calculus Capital manages products under EIS and VCT schemes, so its Head of Investor Relations, Francesca Rayneu, is ideally placed to discuss the arguments for both.
We discuss Knowledge Intensive EIS funds, sometimes called KI funds. These are still relatively new in the market, so it’s good to get a full explanation. Committed Capital have launched a few KI funds now, so we asked their Head of Business Development, Glen Stewart, on to explain them.
We discuss the tax reliefs for the Seed Enterprise Investment Scheme (SEIS). Despite only launching its first SEIS fund a few years ago, Haatch Ventures has been successful in attracting funds and, now, getting exits. Director Olivia Drinnan joins the podcast to explain everything.
In the fifth of the EIS and VC Basics mini-series for The EIS Navigator, we discuss the Seed Enterprise Investment Scheme (SEIS). Jenson Ventures is one of the longest-standing SEIS managers, and Jeffrey Faustin has been with them for over a decade so has lots of knowledge to share about the scheme.
Mercia manages the three Northern VCTs, so we asked their Head of Sales and Private Investor Relations, Paul Mattick, to come on and explain how they work. VCTs are the most popular of the tax advantaged schemes, so it’s great to get someone with such deep knowledge to explain the reliefs.
Foresight Group manage four VCTs, so we asked Nel Isaac to come on and explain what they are about. VCTs are the most popular of the tax advantaged schemes, so it’s great to get someone with such deep knowledge to give us a primer.
This episode explores the tax reliefs that are available on investments using the Enterprise Investment Scheme (EIS). For many investors, these are one of the main attractions of the scheme and the reliefs are amongst the most generous in the world.
An introduction to the Enterprise Investment Scheme (EIS) with Nic Pillow, Senior Ventures Manager at Blackfinch Ventures.
The Enterprise Investment Scheme (EIS) is a UK government scheme designed to encourage investment in smaller, higher-risk companies by offering tax reliefs to investors who subscribe for qualifying new shares. EIS helps early-stage and growth companies raise private capital while giving investors access to venture capital investments with the potential for significant growth.
Our episode explaining what EIS is and how the scheme works explores the fundamentals of EIS, including which companies can qualify and what investors should understand before investing.
EIS offers several tax reliefs to qualifying investors, including income tax relief, capital gains tax deferral and loss relief. Qualifying EIS shares may also benefit from Business Relief for inheritance tax purposes, subject to the applicable rules.
Income tax relief is generally 30% of a qualifying investment, subject to the relevant annual investment limits and other conditions. EIS investments must normally be held for at least three years to retain the associated tax reliefs.
Our guide to EIS tax reliefs explains the principal reliefs available and how they can affect the potential tax treatment of an EIS investment.
A Venture Capital Trust (VCT) is a publicly listed investment company designed to invest in smaller, higher-risk businesses. Rather than investing directly in individual companies, an investor buys shares in the VCT and therefore gains exposure to a portfolio of underlying investments.
VCTs were introduced to encourage investment in growing UK businesses. Because VCTs generally hold a portfolio of investments, they can provide greater diversification than investing directly in individual EIS or SEIS companies.
Our episode explaining what VCTs are and how they work looks at the structure of VCTs and their role in venture capital investing.
VCT investors can benefit from income tax relief when subscribing for new VCT shares, subject to the applicable rules and limits. VCT dividends are generally tax-free and gains on the disposal of VCT shares are generally exempt from capital gains tax, subject to the relevant conditions.
There are important differences between VCT and EIS tax reliefs. For example, VCT income tax relief cannot generally be carried back to the previous tax year in the way EIS relief can.
Our explanation of VCT tax reliefs explores the main tax advantages of VCT investing and how they differ from the reliefs available through EIS.
The Seed Enterprise Investment Scheme (SEIS) is designed to encourage investment in very early-stage UK companies. It provides generous tax reliefs to investors who subscribe for qualifying shares, helping young businesses raise capital when they may have limited access to other sources of finance.
SEIS investments are generally higher risk than investments in more established companies, and investors should recognise that some early-stage businesses will fail. The scheme’s tax reliefs are intended in part to compensate investors for taking that additional risk.
Our episode on what SEIS is and how it works provides an introduction to the scheme and its role in supporting early-stage companies.
SEIS provides a range of tax reliefs for qualifying investors, including income tax relief, capital gains tax relief and loss relief. Qualifying SEIS shares may also qualify for Business Relief for inheritance tax purposes, subject to the rules applying at the time.
The income tax relief available through SEIS is generally 50% of the qualifying investment, subject to the annual investment limit and other conditions. Investors can also potentially carry back a SEIS investment to the previous tax year.
Our guide to SEIS tax reliefs explains the main reliefs available and the factors investors should consider when assessing a SEIS opportunity.
EIS is intended to support smaller companies that meet specific qualifying conditions. These conditions cover factors such as the company’s size, age, activities, ownership and the amount of tax-advantaged funding it can receive.
Companies must also satisfy rules concerning how the money raised is used. EIS is therefore not simply a source of funding available to every small or growing business.
Companies considering EIS funding should establish their eligibility before raising investment and should consider whether Advance Assurance from HMRC is appropriate.
Our introduction to what EIS is and how the scheme works provides further background on EIS and the companies it is designed to support.
A Knowledge Intensive (KI) company is a company that meets additional conditions relating to innovation, research and development, intellectual property or highly skilled employees.
KI companies can benefit from higher EIS investment limits and longer periods in which they can qualify for investment than ordinary EIS companies, subject to the relevant conditions.
Our episode on Knowledge Intensive EIS funds explains what makes a company Knowledge Intensive and why these businesses can be particularly relevant to EIS investors.
A Knowledge Intensive EIS fund invests in companies that meet the relevant Knowledge Intensive criteria. Approved KI EIS funds can offer investors certain advantages, including earlier treatment of the investment for income tax relief purposes, subject to the fund meeting the relevant conditions.
Investors should also consider deployment timing. Because a fund may take time to invest its capital into underlying companies, KI EIS funds may not always be suitable for investors with a time-sensitive capital gains tax deferral requirement.
Our detailed guide to Knowledge Intensive EIS funds explores how these funds work and what investors should consider.
Investors can access EIS and SEIS opportunities in several ways, including investing directly into individual companies, using angel networks or syndicates, investing through crowdfunding platforms, or investing through specialist EIS or SEIS funds.
Funds can provide diversification and professional investment management, which can be particularly valuable given the risks associated with investing in early-stage companies. Investors should assess a fund’s strategy, manager, portfolio construction, fees and deployment timetable before investing.
The series’ episodes on SEIS, Knowledge Intensive EIS funds and choosing the right EIS fund or VCT provide further insight into the different ways investors can approach tax-advantaged venture capital investing.
The choice between EIS and VCTs depends on the investor’s objectives and circumstances.
VCTs may appeal to investors looking for a more diversified portfolio and the potential for tax-free dividend income. EIS may appeal to investors who want more direct exposure to individual early-stage businesses, particular sectors or specific investment opportunities, as well as access to a broader range of tax reliefs.
Investors should consider risk, diversification, liquidity, investment time horizon, tax planning objectives, fees and how closely they want to engage with the underlying companies.
Our guide to choosing between EIS and VCTs explores the key differences investors should consider when deciding which approach may be appropriate for them.
When comparing EIS funds and VCTs, investors should look beyond headline tax reliefs and consider the investment manager’s track record, investment strategy, sector focus, portfolio diversification, deployment timetable, fees and previous exits.
Deployment timing can be particularly important when an investor is investing for a particular tax year or has a time-sensitive capital gains tax planning objective.
Past performance should not be considered in isolation. Investors should understand how a manager has generated returns, how diversified its portfolio is and how it handles investments that do not perform as expected.
Our guide to choosing the right EIS fund or VCT looks at some of the practical factors investors should assess when comparing investment opportunities.
Companies considering venture capital funding should first establish why they need external investment and what they want the funding to achieve. They should then identify managers whose investment strategy, sector focus, stage preference and portfolio requirements fit the business.
Targeting the right managers can make fundraising more efficient. Companies should also consider what the investor can contribute beyond capital, including strategic support, sector expertise, introductions and board-level experience.
Our episode on finding the right EIS or VCT manager explores how companies can identify and approach potential investment managers and what they should consider when selecting an investor.
Diversification is particularly important in venture capital because investment returns can be highly concentrated: a small number of successful companies may generate a large proportion of a portfolio’s overall returns.
An EIS or SEIS fund can provide diversification across several underlying companies, but investors should also consider diversification across managers, sectors, investment stages and vintages when building a broader venture capital allocation.
The appropriate level of diversification depends on the investor’s overall portfolio and circumstances.
Our guide to choosing the right EIS fund or VCT considers portfolio construction and some of the factors investors should assess when evaluating a fund or VCT.
EIS and SEIS investments are generally illiquid. Although the minimum holding period for retaining the principal tax reliefs is normally three years, investors may need to hold an investment for considerably longer while the underlying company grows and reaches an exit.
VCT shares are listed, which can provide a more visible route to liquidity. VCT managers may also operate share buyback programmes, although these are not guaranteed and may be subject to the terms of the particular VCT.
Investors should therefore consider their investment horizon and liquidity needs before choosing between EIS, SEIS and VCTs.
Our guide to choosing between EIS and VCTs explores liquidity, diversification and other factors that can influence the decision.
The minimum holding period for retaining the principal EIS and SEIS income tax relief is generally three years, but this should not be confused with a typical investment horizon.
Early-stage venture capital investments can take many years to mature and reach an exit. Investors should therefore regard EIS and SEIS as long-term, illiquid investments rather than products designed for short-term trading.
Our episode on how venture capital exits work explores what happens when investors ultimately seek to realise value from an underlying venture capital investment.
The principal potential source of investment returns is capital growth when an underlying company is sold or otherwise provides an opportunity for investors to realise their investment.
Possible exits include a trade sale to another company, a sale to another investor or, in some cases, an initial public offering. Some investments may also be bought out during later funding rounds.
Because venture capital investments are illiquid and individual companies can fail, investors should consider both the potential for successful exits and the risk of permanent capital loss.
Our episode on how venture capital exits work in EIS and VCTs explains the different routes through which venture capital investments can ultimately generate returns for investors.
An exit is the point at which investors can potentially realise the value created by an underlying company. This makes exits fundamental to venture capital returns.
Successful venture capital investing is not simply about finding companies that can grow; investors and managers also need to consider how and when that growth might ultimately translate into an exit.
The timing and type of exit are unpredictable. Some companies may exit relatively quickly, while others can remain in portfolios for many years.
Our guide to how venture capital exits work in EIS and VCTs explores the different types of exit and why they matter to venture capital investors.
No. EIS, SEIS and VCT investments involve higher levels of risk than many conventional investments. EIS and SEIS investments in particular are generally unquoted and illiquid, and investors can lose some or all of their capital.
Tax reliefs can reduce the effective cost or risk of an investment, but they do not remove investment risk. The availability and value of tax reliefs also depend on the investor, the investment and the relevant rules.
Investors should read the full investment documentation and consider obtaining independent financial and tax advice before investing.
The EIS & VC Basics series provides a practical introduction to EIS, SEIS, VCTs and venture capital investing, from the fundamentals and tax reliefs through to fund selection, investment management and exits. Explore the individual episodes to take a deeper look at each topic.
