Excluded activities: is what your company does an excluded trade?

Published 5 August 2026. This page explains what the test is and sends you to HMRC's own wording for the answer. It does not reproduce the statutory list, because a list restated at one remove is a list that can be wrong.

The short answer

SEIS and EIS are not open to every business. Both schemes apply a trading requirement built around a qualifying trade, and a trade is not qualifying if it consists wholly, or as to a substantial part, in excluded activities [S1] [S2].

Two things about that sentence do most of the work.

"Qualifying trade" has its own definition, and excluded activities are only half of it. The trade must also be conducted on a commercial basis and with a view to the realisation of profits [S3]. A trade nowhere near the excluded list can still fail on that limb.

The excluded activities are a statutory list, in section 192 of the Income Tax Act 2007 and the sections that follow it [S2]. It is not a list of businesses HMRC dislikes, and it is not applied by judgement about how innovative a company is.

The test is not "are we a good company". It is "what proportion of this trade consists of activities on a statutory list".

1. Where the list actually is

Read it at the source, not here. HMRC sets out the list, entry by entry, with the boundaries and carve-outs for each, in its Venture Capital Schemes Manual [S4]. The statute itself is at section 192 [S2].

That is a deliberate choice about this page. Several entries are narrower or wider than their one-line summaries suggest - the energy entries are four separate statutory paragraphs rather than one, the royalties entry carries a carve-out with precise conditions, and the services entry catches far less than its name implies. Any summary short enough to be useful is short enough to be wrong for somebody, and the somebody it is wrong for is the one who needed it.

What is worth knowing before you go and read it:

• The list runs to roughly sixteen entries, from dealing in land and financial instruments through to property development, farming, hotels, care homes, energy and the provision of services to another business [S4].

• The same list governs both SEIS and EIS [S4].

• Touching an entry is not the same as carrying on an excluded activity. Several entries carry statutory carve-outs, and whether one applies is a question of fact about your business.

2. "Substantial part" - what the law says and what HMRC says

The statute does not define "substantial part". Whether excluded activities amount in aggregate to a substantial part of a trade is a question of fact decided on all the relevant circumstances [S4].

HMRC then states its own normal approach:

Where, judged by any measure which is reasonable in the circumstances of the case (for instance, by reference to turnover or capital employed), such activities account for no more than 20 percent of the activities of the trade as a whole, HMRC will normally accept that they are not "substantial".

HMRC Venture Capital Schemes Manual, VCM3010 [S4]

Three things follow from that paragraph, and they are the reason it is quoted rather than paraphrased.

The measure is not fixed. HMRC names turnover and capital employed as examples of a reasonable measure. The same business can look different depending on which is used, so a pre-revenue activity can still count.

It is HMRC's stated normal practice, not a statutory safe harbour. A company at 19 per cent has not passed a test. It has landed inside the range HMRC says it will normally accept.

It is not a one-off measurement. The trade must not consist substantially of excluded activities at any time in the relevant period [S4], so a ratio that drifts is a ratio worth watching.

3. How to use it

1. Write down, honestly, everything the company does - not what it is, but what it does and what it charges for. Include activities that earn nothing yet.

2. Read HMRC's list [S4] against that, entry by entry.

3. For anything that touches an entry, read HMRC's own page for that entry rather than any summary, including this one. The boundaries and the carve-outs are where every real case sits.

4. Then ask which measure is reasonable in your circumstances, and work the proportion out on that measure rather than the one that is easiest to calculate.

5. If anything material touches the list, this is a question for your accountant or tax adviser before it is a question for HMRC.

4. Advance assurance is not an answer to this question

Companies commonly ask HMRC for advance assurance before a raise. It is worth understanding exactly what that does.

It will not tell you if an investor would meet the conditions of the scheme.

gov.uk, Apply for advance assurance on a venture capital scheme [S5]

Assurance is HMRC's view about the company, given on the basis of what the company told HMRC. It is not a guarantee of relief for any investor, and it does not settle the position for all time: the conditions have to keep being met after the shares are issued. HMRC also states that an assurance should not be taken as a more general endorsement, or as an indication of potential investment performance [S5].

Angels Den does not verify any company's advance assurance, and does not assess any company's eligibility for either scheme.

5. What this article cannot tell you

It cannot tell you whether your company's trade qualifies. That is a question of fact about your business, decided by HMRC on the full circumstances, and no page written for a general audience can answer it.

Clearing this test is also not the same as qualifying. There are separate conditions on age, size, employee numbers, how much can be raised and what the money is spent on, and a separate risk-to-capital condition which has two parts, both of which have to be met: the company must have objectives to grow and develop its trade over the long term, and the investment must pose a significant risk of a loss of capital to the investor greater than the net return [S6].

What this page does is tell you which question you are asking, and where HMRC answers it.

Sources

All gov.uk and HMRC pages below were read on 5 August 2026 and each carried an Open Government Licence v3.0 notice in its footer. Legislation references are to the Income Tax Act 2007 as published on legislation.gov.uk. Contains public sector information licensed under the Open Government Licence v3.0.

S1 - HMRC Venture Capital Schemes Manual, VCM13060 - the EIS trading requirement and the meaning of "qualifying trade". URL: https://www.gov.uk/hmrc-internal-manuals/venture-capital-schemes-manual/vcm13060. Licence: OGL v3.0.

S2 - Income Tax Act 2007, s.192 - excluded activities, supplemented by ss.193 to 199. URL: https://www.legislation.gov.uk/ukpga/2007/3/section/192. Licence: OGL v3.0.

S3 - Income Tax Act 2007, s.189 - meaning of "qualifying trade": conducted on a commercial basis and with a view to the realisation of profits, and not consisting substantially of excluded activities. URL: https://www.legislation.gov.uk/ukpga/2007/3/section/189. Licence: OGL v3.0.

S4 - HMRC Venture Capital Schemes Manual, VCM3010 - meaning of "excluded activities", the list, the relevant period, and the 20 per cent normal-acceptance approach to "substantial part". URL: https://www.gov.uk/hmrc-internal-manuals/venture-capital-schemes-manual/vcm3010. Licence: OGL v3.0.

S5 - gov.uk, Apply for advance assurance on a venture capital scheme (last updated 18 December 2024). URL: https://www.gov.uk/guidance/venture-capital-schemes-apply-for-advance-assurance. Licence: OGL v3.0.

S6 - HMRC Venture Capital Schemes Manual, VCM8540 - the risk-to-capital condition and its two parts. URL: https://www.gov.uk/hmrc-internal-manuals/venture-capital-schemes-manual/vcm8540. Licence: OGL v3.0.