How Insurance-Related Businesses Can Qualify for SEIS and EIS
The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) are intended to support early-stage, high-risk trading companies that are seeking to grow and scale. While insurance is often cited as a sector that is excluded from these reliefs, this does not mean that all businesses operating in or around insurance are automatically disqualified. With careful structuring and a clear understanding of HMRC’s approach, certain insurance-related businesses can qualify.
The key issue is not whether a business operates in the insurance market, but whether it is actually carrying on an excluded insurance trade.
Insurance as an excluded activity
HMRC guidance makes it clear that insurance, along with banking and other financial services, is an excluded activity for the purposes of SEIS and EIS. A traditional insurance company that underwrites risk, holds regulatory capital and generates profit from assuming that risk will therefore not qualify.
However, HMRC looks beyond labels and examines the substance of the company’s trade. Where a business can demonstrate that it is not itself assuming insurance risk, or that insurance activities do not form a substantial part of its overall trade, eligibility may still be possible.
The importance of the “substantial proportion” test
A company will generally remain eligible provided that excluded activities do not amount to a substantial proportion of its business. In practice, HMRC treats activities accounting for more than 20% of the company’s overall trade as substantial.
This assessment is determined by reference to multiple factors, including turnover, asset composition, management time allocation, and overall operational focus. Insurance-related businesses seeking SEIS or EIS investment must therefore be able to evidence that the principal nature of their trade is a qualifying activity, such as technology development, data analytics, or the provision of services and that any insurance component is secondary and incidental.
Insurtech and intermediary models
The strongest route to qualification for insurance-adjacent businesses is often through an intermediary or insurtech model. Managing General Agents (MGAs) are a common example. Although MGAs may be involved in underwriting decisions, the key distinction is that the financial risk remains with the authorised insurer, not the MGA itself.
Similarly, businesses that provide distribution platforms, policy administration, claims management, comparison services or underwriting software may be able to argue that their trade is one of technology or services rather than insurance. In these cases, the absence of balance-sheet risk is usually central to the analysis.
Advance assurance and HMRC engagement
For any insurance-related business, early engagement with HMRC is critical. Advance assurance allows the company to explain its business model, revenue streams and risk profile before raising funds, and to obtain confirmation that it is likely to be regarded as qualifying.
This is particularly important where the business sits close to the boundary between excluded and non-excluded activities. Investors will also typically expect advance assurance before committing capital, given the consequences if reliefs are later denied.
Commercial purpose and growth
Even where a business avoids excluded insurance activities, it must still meet the wider requirements of SEIS and EIS. The company must be carrying on a genuine trading activity with a clear growth strategy and real commercial risk. The schemes are not intended to support capital-protected investments or structures designed primarily to deliver tax advantages.
HMRC will therefore consider whether the business is consistent with the policy intent of supporting entrepreneurial companies, rather than low-risk financial arrangements.
Investor considerations
From an investor perspective, it is important to remember that SEIS and EIS reliefs are only available to individual UK taxpayers, not to corporate investors. Relief is also dependent on the company maintaining its qualifying status for the relevant period, usually three years. If the business is later found to be carrying on an excluded insurance trade, tax reliefs may be withdrawn.
In addition, investors must avoid being “connected” with the company, for example by holding more than 30% of the shares or voting rights, or by being employees, subject to limited exceptions under SEIS.
Conclusion
While traditional insurance companies that underwrite risk are unlikely to qualify for SEIS or EIS, this does not exclude the wider insurance sector. Insurtech businesses, MGAs and other intermediaries may be eligible where they do not assume insurance risk and where excluded activities do not form a substantial part of the trade.
Eligibility in this area is highly fact-specific. Businesses considering SEIS or EIS fundraising should obtain specialist tax advice and seek advance assurance from HMRC at an early stage.
At the Jonathan Lea Network, we regularly advise on complex SEIS and EIS applications, including those involving insurance-related and other potentially excluded activities. We assist clients by preparing advance assurance applications and drafting detailed letters to HMRC that clearly explain the company’s business model, trading activities and risk profile. This includes developing nuanced arguments around the excluded activity rules, tailored to the specific facts of each case, to accurately present the company’s position and support a clear assessment of eligibility.
We usually offer a no-cost, no-obligation 20-minute introductory call as a starting point or, in some cases, if you would just like some initial advice and guidance, we will instead offer a one-hour fixed fee appointment (charged from £250 plus VAT depending on the complexity of the issues and seniority of the fee earner).
Please email wewillhelp@jonathanlea.net providing us with any relevant information or call us on 01444 708640. After this call, we can then email you a scope of work, fee estimate (or fixed fee quote if possible), and confirmation of any other points or information mentioned on the call.
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This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited.