SEIS, EIS and Tokenisation: What We Know, and What We Don't
- Shawn Jhanji
- 7 days ago
- 7 min read
A plain English guide for founders and investors. Part of our intelligence series on equity tokenisation in the UK.
For most early-stage investors in the UK, SEIS and EIS are not a footnote. They are often the reason the cheque gets written, so whenever the conversation turns to tokenising startup equity, the first sensible question is also the hardest: what happens to the tax reliefs?
This guide sets out what can be said with reasonable confidence today, and what is still genuinely open. It assumes no prior knowledge. Where a term has a specific meaning, we explain it in plain English as we go.
One thing to say clearly before we start. We are piecing this together too and while many opinions exist, nobody yet has a finished, tested rulebook for tokenised equity under SEIS and EIS yet. In reality, the live examples are only now starting to emerge.
What follows is our current interpretation, drawn from the rules as they stand, from conversations we have been having with regulators and lawyers, and from our own work in the space. It is a considered view, not a final answer, and we will tell you openly where we are still uncertain. We would rather think out loud with you than pretend the questions are closed.
First, the words that keep coming up
SEIS and EIS are two government schemes that give investors a large tax saving for backing young, higher-risk companies. SEIS, the Seed Enterprise Investment Scheme, gives 50% income tax relief on up to £200,000 invested a year. EIS, the Enterprise Investment Scheme, gives 30% on up to £1m a year. Both also remove capital gains tax on any profit, but only if the investor holds the shares for at least three years. Keep that three-year rule in mind, because it turns out to be the crux of everything below.
A share is a unit of ownership in a company. A token, in the model we are describing, is simply a digital record of that share. It is not a new asset and it is not a cryptocurrency. Think of it as a modern version of the paper share certificate: proof of who owns what and it carries exactly the same rights.
Tokenisation is the act of creating that digital record on a ledger, so that a share can be administered, and eventually traded, more easily.
What we know
The tax relief belongs to the share, not the token. The relief is earned by buying and holding the real, legal share in the company. The token is only the record of that share. As long as the token reflects the share accurately and never replaces it, the relief stays exactly where it always was, with the underlying share and the person who owns it.
The company's own register stays the official record. Every UK company keeps a register of members, the official list of who owns its shares. A common assumption is that Companies House holds this record. It does not. The register of members is kept by the company itself, and under the Companies Act 2006 it is that register, together with ordinary property law, that decides who legally owns a share. Companies House holds filings about the company, such as share allotment forms and the annual confirmation statement, but it is not the title record, and HMRC looks to the register of members and the real ownership behind it. A sensible tokenised model keeps the register of members as the single source of truth and makes the token follow it, never the other way around. This is the anchor for everything else.
HMRC already accepts that the owner on paper and the real owner can be two different people. This is the point worth slowing down on, because it is what makes a tokenised model possible at all.
There are two ways to own a share:
The legal owner is the name written on the official register. The owner on paper.
The beneficial owner is the person who truly owns the value of the share: who put the money in, who gets the upside, who really stands behind it.
Usually these are the same person. But the law allows them to be split. Someone can hold a share on paper on your behalf while you remain the real owner. That stand-in is called a nominee. The simplest and cleanest kind is a bare nominee: they hold the share purely for you, do nothing with it without your instruction, and must hand it back the moment you ask. They have no say of their own and no stake of their own.
HMRC's rules expressly say that when a nominee holds shares for an individual, the shares are treated as that individual's. In plain terms, HMRC looks past the name on paper and gives the tax relief to the real owner behind it.
Why this matters for tokenisation: a token can name the real owner sitting behind each share. That fits neatly inside a rule HMRC already operates, so tokenising does not force HMRC to approve some brand new idea of ownership. There is one important condition. It has to be a simple one-share, one-named-person arrangement. It must not be a pooled vehicle, meaning a fund or structure where many investors' money is mixed together and each person owns a slice of the pot rather than specific, identifiable shares. Pooled holdings do not get this look-through treatment, and would lose the relief.
The fact that a share could be traded does not, by itself, break the relief. PISCES is a new UK framework that lets private company shares be traded in occasional, controlled windows rather than continuously. PISCES is not classed as a stock exchange for tax purposes. So a share being tradable on it does not make the company "listed", and does not affect eligibility at the moment someone invests.
The tension at the heart of it
Here is the part that catches people out. Tokenisation makes shares easier to trade. SEIS and EIS reward investors for not trading for three years. Those two facts are not contradictory, but they have to be sequenced honestly.
Selling a share within three years of buying it is called a disposal. If an investor disposes of the shares inside that window, whether through a traditional paper transfer or a token changing hands on PISCES, the income tax relief is clawed back, meaning HMRC reclaims the money it gave, and the capital gains exemption is lost as well. How the sale is settled makes no difference. The only events that avoid this are passing the shares to a spouse or civil partner, or death.
It is worth being precise about one thing. The tax accommodations made for PISCES so far cover employee share schemes and stamp duty only. There is no SEIS or EIS carve-out, and none has been proposed.
So the honest framing is this. For an investor who has claimed the reliefs, liquidity is a benefit from year three onwards, not a way around the rules. Come in early for the relief, hold for three years, then consider trading or raising again. Investors who never claimed the reliefs, or who are already past the three-year mark, can use that liquidity more freely.
What we don't know yet
Some questions are genuinely open, and anyone claiming complete certainty should be treated with caution.
Whether HMRC will accept a specific token and nominee setup as a true bare nominee arrangement. The general principle is settled. Whether one particular design qualifies is a matter of detail that deserves a specialist's opinion.
Where promoting future liquidity crosses a line. The reliefs require that the investment is genuinely at risk and that there is no pre-arranged exit, meaning no plan agreed in advance to sell the shares on at a set point. Mentioning that liquidity may become possible later is fine. Promising a guaranteed or scheduled early sale is not.
The fine administrative detail of a clawback when a sale settles on PISCES. That a within-three-years sale triggers a clawback is clear. Exactly how it is reported and processed when settlement happens on a digital ledger is still being worked out in practice.
The practical takeaway
Tokenisation does not appear to break SEIS or EIS on its own. The relief follows the share, and the share stays on the official register. The real work is in the design, the paperwork, and above all in explaining the three-year rule clearly so that no investor is ever caught out. Get those right, and tokenisation becomes a tool that sits alongside the reliefs rather than against them.
We will keep this guide updated as the rules develop and as live pilots produce real evidence.
Key Takeaways
SEIS and EIS relief belongs to the legal share, not the token. The token is only a digital record of that share.
The company's register of members, not Companies House, is the legal source of truth. A sensible tokenised model makes the token follow that register, never the reverse.
HMRC already looks through legal title to the real, beneficial owner. A bare nominee holding a share for a named investor fits inside that existing rule. A pooled fund, where investors own a slice of a pot rather than specific shares, does not.
Selling within three years, by any method including a token trade on PISCES, claws back the relief and loses the capital gains exemption. Liquidity is a year three benefit, not a loophole.
The principles are reasonably clear. The specific structures, the limits on marketing future liquidity, and the mechanics of a clawback settled on a ledger are still being worked out.
Sources
This article is provided for general information only and does not constitute legal, financial, or investment advice. The regulatory treatment of tokenised assets and digital securities varies by jurisdiction and continues to evolve. Readers should seek independent professional advice before making any financial, legal, or regulatory decisions.
Comments