The UK government has proposed changes to startup investment tax rules that would preserve part of an investor's relief when a company exceeds an Enterprise Investment Scheme funding limit. Announced by HM Revenue and Customs on 28 October, the package also addresses same-day fundraising and payment problems that can affect other investors in a share issue.
The changes cover the Seed Enterprise Investment Scheme, Enterprise Investment Scheme and Venture Capital Trusts, commonly known as SEIS, EIS and VCTs. HMRC's published policy paper says legislation will be introduced through Finance Bill 2026-27. These are proposed technical changes with specified future and earlier reference dates, rather than a statement that all the new rules are already operating.
Funding limits and the timing of payments
Under the proposed EIS change, exceeding a company's annual or lifetime investment limit would no longer automatically remove all tax relief. An apportionment mechanism would preserve relief for the proportion of the share issue within the relevant limit. The announcement concerns how relief is calculated when a limit is exceeded, rather than another increase in the limits themselves.
A separate change would allow SEIS shares and EIS shares to be issued on the same day without that timing affecting eligibility. It would also permit SEIS shares to be issued on the day a VCT investment is made. HMRC describes the changes as a way to make the schemes more consistent and reduce disproportionate consequences from technical issues.
Payment timing would receive a narrowly defined safeguard. HMRC would gain discretion to treat shares as fully paid where subscription money arrives after the share issue because of exceptional and unavoidable circumstances outside the control of both the company and the investor. The proposal does not give investors a general entitlement to pay late, and the discretion would depend on those stated circumstances.
Another amendment would protect other qualifying investors in the same share issue. If one or more investors failed the fully-paid requirement, that failure would not, by itself, prevent relief on qualifying shares subscribed for by the others. This addresses the effect of an individual payment problem on the wider fundraising round without removing the qualification requirements for the shares concerned.
Most changes are scheduled for April 2027
The EIS apportionment, same-day fundraising and fully-paid share changes would apply to shares issued, or VCT investments made, on or after 6 April 2027. Companies and investors assessing an earlier transaction therefore cannot assume that those proposed protections apply simply because the policy has now been announced.
HMRC also plans to align the SEIS rules governing the date from which interest is charged when relief is withdrawn or reduced with the equivalent EIS provisions. That amendment would apply to SEIS shares issued on or after 6 April 2027. Shares issued before that date would remain subject to the existing rules.
The VCT change uses a different reference date. When Income Tax relief is withdrawn, the calculation would use the rate of relief applicable when the shares were issued. HMRC says the amendment would affect disposals of shares issued on or after 6 April 2026. The issue date is central to that description; it is not an announcement covering every disposal made after that date.
The package follows the government's call for evidence on tax support for entrepreneurs, launched alongside Budget 2025. That exercise closed in February 2026 and received 247 written responses. The government published its response at Budget 2026. HMRC says the technical amendments are intended to give founders and investors greater certainty about the operation of the schemes.
The expected reach is limited. HMRC estimates that fewer than 100 individual investors and fewer than 100 businesses would be affected each year. It expects a negligible Exchequer impact and no significant macroeconomic effect. Businesses would face one-off familiarisation costs, with no ongoing costs expected, while HMRC estimates its own IT implementation costs at £400,000.
Monitoring would use companies' statutory SEIS and EIS compliance statements, VCT returns and existing HMRC compliance information. The technical package is separate from the proposed Founders' Relief and its growth tests and the £450 million venture-debt product for scale-ups also covered by Dalimss News. The next legislative step for these scheme amendments is Finance Bill 2026-27.
Contains public sector information licensed under the Open Government Licence v3.0. HMRC material has been condensed and independently rewritten.
