SEIS/EIS Qualifying Trades: Full List and Exclusions Explained

Introduction

Securing investment under the SEIS/EIS qualifying activities frameworks is a lifeline for many young companies. These UK tax relief programmes can unlock seed and growth capital from angel investors and venture funds. Yet the schemes are tightly regulated: only certain qualifying business activity SEIS/EIS trades can claim relief, while a long list of excluded sectors is explicitly barred. Misclassifying your business could jeopardise your funding round, so this guide provides a detailed look at what trades qualify and which are excluded.

This article uses plain language to unravel HMRC’s definitions, focusing on the risk‑to‑capital condition. It draws on HMRC guidance, legal definitions, and industry examples, and it weaves in real‑world data where possible. We examine how “platforms” differ from “financial services,” when software licensing fees are still qualifying and why energy generation is treated differently from green technology R&D. Undo Capital’s compliance platform can help you prepare a robust advance assurance application and avoid errors.

What Does “Qualifying Trade” Mean Under SEIS/EIS?

HMRC’s starting point is that a qualifying trade must be carried on with a view to a profit and must not consist “to any substantial extent” of excluded activities. The trade can be new or existing, as long as it has a commercial purpose and operates on normal market terms. Research and development that leads to a qualifying trade is itself treated as qualifying. The business must also have a permanent establishment in the UK.

Core Requirements of a Qualifying Trade

• Commercial and profit‑oriented: The company must conduct its business on a commercial basis with the aim of generating profits rather than merely managing investments. It cannot be set up to avoid tax or to shelter other income.
• Risk to capital: There must be a genuine risk that investors could lose more capital than they gain. HMRC looks at how the company plans to grow, its assets, marketing, financing arrangements and whether investors are given any downside protection. A business where returns are guaranteed, or capital is protected, may fail this test.
• Trading activity: The funds raised must be used for trading or for research and development leading to a trade. Passive investment of surplus cash or dealing in securities would fail.

Substantial excluded activities are prohibited: Even if the company carries on some excluded activity, it will qualify only if that activity is insignificant (generally less than 20%).

How HMRC Assesses Business Activity?

HMRC uses a holistic approach when judging SEIS/EIS trade requirements. Officers examine the company’s turnover mix, customer contracts, intellectual property and marketing materials. They often request evidence of projected revenues and cost structures to verify whether the trade is genuinely commercial and whether any excluded activity is “insignificant.” If a startup operates an online platform that merely connects buyers and sellers, HMRC will probe whether it takes ownership of the goods or bears financial risk. A mortgage broker regulated solely by the Financial Conduct Authority (FCA) may qualify, but a firm directly lending money would fall within EIS excluded activities.

For more on eligibility criteria, see SEIS/EIS eligibility criteria explained for founders.

Full List of SEIS/EIS Qualifying Trades (Allowed Activities)

Below is an extensive, though not exhaustive, list of trades that typically meet SEIS/EIS qualifying activities requirements. Use this as guidance; consult professional advice for definitive rulings.

Technology and SaaS

Modern software businesses are generally considered SEIS qualifying companies because they develop products, sell subscriptions and seek profits. This category includes:

• Software development and maintenance platforms, including SaaS tools, enterprise software and B2C apps.
• Artificial‑intelligence algorithms, machine learning services and analytics platforms.
• Marketplaces and digital platforms facilitating transactions between third parties, provided the platform does not hold client money or act as a financial intermediary.
• Fintech tools providing unregulated services like budgeting apps or payment processing, where the firm does not take deposits or lend its own funds.

E‑commerce and Consumer Services

Retail and services delivered online or offline qualify, including:

• E‑commerce stores sell goods directly to consumers or via drop‑shipping models.
• On‑demand services such as food delivery, ride‑hailing, personal care and gig‑economy platforms, provided they are not engaged in excluded sectors (e.g., hotel management or regulated taxi licensing).
• Subscription boxes, digital subscription services and membership models.

Manufacturing and Engineering

Manufacturing physical goods is typically a qualifying trade. Examples include:

• Manufacturing electronic devices, machinery, automotive parts or consumer products.
• Engineering services that design and build hardware systems.
• Robotics and hardware startups that combine software and mechanics.

Healthtech, Medtech and Biotech

Life sciences companies often undertake lengthy R&D but remain qualifying trades because R&D leading to a qualifying trade is itself eligible. This includes:

• Development of medical devices and diagnostics.
• Therapeutics, drug discovery and biotech research.
• Health monitoring platforms and telemedicine services.

Creative and Digital Services

These trades span creative industries, digital marketing and content production:

• Digital media production, such as video, animation and gaming studios.
• Marketing agencies, design studios and branding consultancies, provided they do not provide legal or accountancy services, which are excluded.
• Music and film production companies (excluding controlling rights that produce royalties for third‑party IP owners).

Green Tech and Energy Efficiency Services

Startups developing technology to reduce energy consumption or environmental impact may qualify as long as they are not directly generating energy. Examples:

• Smart home energy‑efficiency devices and IoT sensors.
• Software platforms for carbon accounting and sustainability reporting.
• Manufacturing of energy‑generation equipment, such as turbines or solar panels, is not itself excluded.

Education Technology

Edtech businesses are usually qualified trades. This includes:

• Online learning platforms deliver courses or training.
• Learning management systems and adaptive learning software.
• Edtech subscription services for students and teachers.

R&D‑Led Enterprises

Companies still in research mode can qualify if they intend to commercialise the results. As HMRC notes, research and development “leading to a qualifying trade” is counted as a qualifying trade. Examples include:

• Materials science research to develop new composites.
• Space technology R&D aiming to launch satellites or propulsion systems.
• Deeptech Ventures is exploring quantum computing or advanced AI.

The above activities are wide‑ranging. The common thread is that each trade sells goods or services, aims for profit and does not fall into excluded sectors. Use these examples as guidance; each case is assessed on its facts.

SEIS/EIS Excluded Activities (full HMRC List)

The legislation lists trades that are excluded from SEIS/EIS. A company carrying out these activities cannot obtain SEIS/EIS relief unless the activity is “insignificant” (typically less than 20% of turnover). The table below summarises the exclusions with references to HMRC guidance.

Grey Areas and Mixed Trades

Some sectors do not fit neatly into the allowed or excluded categories. To navigate these mixed trades SEIS/EIS situations, you must analyse the primary revenue stream, the level of control and the percentage of turnover attributable to each activity. The following grey zones often cause confusion.

Platforms vs Financial Intermediaries

An online marketplace that brings buyers and sellers together typically qualifies. The key is that the platform does not take ownership of goods or hold client money. For instance, a peer‑to‑peer marketplace that collects a commission on each sale may qualify as a SEIS qualifying trade. In contrast, a company providing loans or investment products directly to customers is engaged in banking or financial services and is therefore an EIS excluded activity.

Software with Regulated Financial Functionality

Fintech startups may build software for payments, budgeting or investment analytics. If the firm simply sells software subscriptions and does not handle deposits or credit, it typically qualifies. However, if the business holds client funds, invests them or provides regulated advice, it may cross into excluded territory. The difference often depends on whether the business is authorised by the PRA for deposit‑taking or by the FCA only.

Hospitality Models

Bars and restaurants are qualifying trades because they supply food and beverages. But when the business provides overnight accommodation, it is considered a hotel or guest house and therefore excluded. Pop‑up accommodation or glamping sites can fall into a grey area; HMRC may consider factors such as marketing, occupancy rates and services offered.

Real‑Estate Tech vs Property Development

A prop‑tech company that offers software for managing properties or advertising rentals is usually allowed. The problem arises when the company also acquires and develops properties for sale or rent; this property development element is excluded. To qualify, ensure that any development activity is insignificant compared with the core tech business.

Car Rental vs Leasing

Car‑sharing platforms that facilitate bookings without owning the vehicles may qualify. Conversely, businesses that purchase cars and rent them out are engaged in leasing, which is excluded.

Renewable Energy vs Energy Generation

Manufacturing or installing renewable energy equipment may qualify, but operating the energy plant and selling electricity is excluded. For example, a company designing battery storage technology is a qualifying trade, while running a solar farm is not.

Understanding these distinctions is essential. When describing your business to HMRC, be clear about what you do and how revenues are generated. Evidence such as contractual terms, invoices and marketing material can demonstrate that excluded activities are minimal.

How HMRC Evaluates a Startup with Multiple Activities?

Companies often engage in multiple activities. HMRC will test whether any excluded activity is substantial. Key factors include:

Primary Revenue Source

HMRC examines where the bulk of turnover and profits arises. If 80 % of revenues come from a qualifying trade and 20% from an excluded activity, the latter may be considered “insignificant”. Clear evidence of revenue sources, such as accounts, forecasts and customer contracts, helps prove your case.

Allocation by Percentage of Trade Activity

The 20% rule is a general guideline. HMRC may look at metrics beyond turnover, including asset allocation, time spent by staff and marketing focus. If the non‑qualifying part uses most of the assets or staff time, HMRC could consider it substantial even if it produces less revenue.

Non‑Qualifying Activities Must be “Insignificant”

The law does not define “insignificant,” but HMRC guidance suggests that if an excluded activity accounts for no more than one‑fifth of the business by any relevant measure, it is likely to be acceptable. Document this analysis in your advance assurance application.

Common Mistakes Startups Make When Assessing Qualifying Trades

Many founders fall foul of SEIS/EIS rules not because their business is fundamentally disqualified, but because of avoidable mistakes:

Misunderstanding Regulated Activities

Founders sometimes assume that because they operate a marketplace or provide a software tool, they will qualify automatically. If the platform facilitates credit, holds client funds or deals in securities, it may be deemed a financial service. Always verify regulatory status and explain it clearly to HMRC.

Describing the Business Model Incorrectly

In advance assurance applications, vague descriptions like “we are an investment platform” can raise red flags. Provide clear details about the goods or services sold, the revenue model and how money flows. For example, emphasise that payments pass directly between buyers and sellers via third‑party processors rather than through your company account.

Overlapping Activities (e.g., advisory + SaaS)

Some startups offer both software and professional services. If the professional service is legal, accountancy or regulated financial advice, it is excluded. Structure the business so that the service element is minimal and separate from the main SaaS product. Consider spinning out advisory arms into distinct companies.

Failure to Provide Revenue Model Evidence

HMRC wants to see that your business aims for profit. Pre‑revenue companies must show credible forecasts, a pricing strategy and market analysis. Without this, HMRC may view the trade as speculative or investment‑like and decline the application.

Not Addressing Risk to Capital Properly

Some founders assume that risk to capital is self‑evident. You must explicitly show how investor capital is exposed: e.g., explain product‑development risks, competitive threats, capital requirements and market uncertainties. Avoid structures that guarantee returns or provide liquidation preferences that shield investors from loss.

For more tips on avoiding common pitfalls, see the top 10 mistakes startups make when applying for SEIS/EIS.

How to Confirm Your Trade for SEIS/EIS (Advance Assurance Approach)?

Advance assurance is the process of asking HMRC to confirm that your investment scheme meets the conditions for SEIS/EIS. It is not mandatory, but it is highly recommended because it signals credibility to investors. Here’s how to prepare:

Preparing a Clear Business Description

Begin by drafting a concise description of your business that emphasises its commercial goals, the goods or services sold and the intended use of funds. Explain how the trade will develop, including key milestones and growth plans. Avoid jargon and highlight that the company is a SEIS qualifying trade with no substantial excluded activity.

Demonstrating Qualifying Activity in Documentation

Prepare a business plan showing revenue models, customer acquisition strategies, competitive advantages and IP assets. Include evidence that any non‑qualifying activities are insignificant. For example, if you run an e‑commerce platform and provide optional extended warranties via a third party, show that warranty commissions are less than 5 % of turnover.

Providing Financial Forecasts for HMRC

Even early‑stage companies need credible forecasts. Build a financial model projecting revenues, costs and profits over three to five years. Ensure that assumptions are realistic and consistent with market data. HMRC will cross‑check that the numbers reflect a commercial, profit‑driven trade.

Addressing Excluded Activities in Advance Assurance

If your business touches on grey areas, such as energy, property or finance, include a clear explanation of why these activities are ancillary. Provide contracts or letters from suppliers to prove that your company does not generate energy or own property. If necessary, restructure operations to segregate excluded activities into a separate entity not seeking SEIS/EIS.

For a full guide, read how to apply for SEIS/EIS advance assurance.

Next Steps

Understanding SEIS/EIS qualifying trades and EIS excluded activities is vital for any founder or investor planning to use these schemes. HMRC’s rules aim to ensure that tax relief supports entrepreneurial ventures, not passive investments or low‑risk projects. As we’ve shown, most technology, creative, manufacturing and R&D‑driven companies will meet SEIS/EIS trade requirements, provided they avoid substantial excluded activities like property development, financial services or energy generation.

By using Undo Capital, founders save time and reduce the risk of errors. The service does not provide tax advice but ensures that documentation is consistent with HMRC requirements.