SEISS calculation

Jeremy535897

ad_man said:

Okay here's one on SEISS calculations : self employed via two unrelated businesses. One business ‘A’ makes a trading profit of £20k and to make things simple has made that same trading profit amount for the last 3 tax years. And importantly it is also the amount that has been taxed on less personal allowance. The other business ‘B’ that has only been trading the last 2 tax years makes a £4k loss first year and £2k loss the second year. In terms of the SEISS grant rather than base the trading profit on the TAXED £20k profit average over the last 3 years HMRC instead subtracts the trading loss amount from business B over those 2 tax years. The average per year is now down to £18k to equal a lower grant payment.

Is that a fair way to calculate the grant payment bearing in mind tax was paid on £20k trading profit for each of the previous 3 tax years? I believe not.

Why didn't you set the loss on B against the profit on A?

ad_man

Why didn't I set the loss on B against the profit on A? It's now allowed that's why. If it were then what is to stop anyone from setting up a 'hobby' type business (or two) against their main business and incurring losses from each one of those secondary businesses to then set the losses on the main (profitable business). You could have 5 self employed businesses going each tax year but they would all be assessed separately – you cannot go setting off losses from one self employed business to another entirely seperate one.    

Jeremy535897

Of course you can, so long as the loss making business is carried on with a view to profit (which stops the hobby business loss being set sideways). Such a loss can be set against your total income.

mobilejo

ad_man said:

Okay here's one on SEISS calculations : self employed via two unrelated businesses. One business ‘A’ makes a trading profit of £20k and to make things simple has made that same trading profit amount for the last 3 tax years. And importantly it is also the amount that has been taxed on less personal allowance. The other business ‘B’ that has only been trading the last 2 tax years makes a £4k loss first year and £2k loss the second year. In terms of the SEISS grant rather than base the trading profit on the TAXED £20k profit average over the last 3 years HMRC instead subtracts the trading loss amount from business B over those 2 tax years. The average per year is now down to £18k to equal a lower grant payment.

Is that a fair way to calculate the grant payment bearing in mind tax was paid on £20k trading profit for each of the previous 3 tax years? I believe not.

So you made £60k profit over 3 years in one SE business, but lost £6k in another SE business, so you (the individual) made £54k. Average over 3 years is £18k.

What you want is for them to recognise your profits but ignore the losses? It doesn't work like that. The fact you paid tax on the profits without any offset for the losses is irrelevant. You can carry forward the losses when/if company B starts making profit.

What a person has been taxed on is clearly not part of the Gov. strategy because dividends (which directors pay tax on) are not taken into account for any form of support. 

ad_man

You're assuming, I imagine, that accounts are seviced via accrual which is not the case. It's cash basis and on cash basis no, you cannot as I said offset losses from one trade against another. For that same reason and by the same token I do see why HMRC can justify subrtacting a loss from one trade against the profit of another where both trades are accounted for via cash basis.   

Jeremy535897

I have never understood why anyone uses the cash basis for anything but the simplest circumstances, and this is an extremely good reason not to.

g1969

I have a problem on this one.
I was employed in 16/17 so I guess that is not taken into account. In 17/18 I was employed and self employed  for which i made 30k from employment and a 12k loss on self employment. In 18/19 I was self employed and lets say 16k profit. So the way I looked at this was as my employment in 17/18 was greater than SE in 17/18 and 18/19 that would not make me  eligible for a grant as it needs to be 50% or greater to claim. So I thought my claim would be based on 18/19 only. However HMRC has added them together. I have appealed on the basis i am not eligible to claim over the 2 year period and believe I am over 1 year 18/19.  My money is down 90% on what it would have been. Any thoughts? 

unholyangel

ad_man said:

Okay here's one on SEISS calculations : self employed via two unrelated businesses. One business ‘A’ makes a trading profit of £20k and to make things simple has made that same trading profit amount for the last 3 tax years. And importantly it is also the amount that has been taxed on less personal allowance. The other business ‘B’ that has only been trading the last 2 tax years makes a £4k loss first year and £2k loss the second year. In terms of the SEISS grant rather than base the trading profit on the TAXED £20k profit average over the last 3 years HMRC instead subtracts the trading loss amount from business B over those 2 tax years. The average per year is now down to £18k to equal a lower grant payment.

Is that a fair way to calculate the grant payment bearing in mind tax was paid on £20k trading profit for each of the previous 3 tax years? I believe not.

Yes it's a fair way because if you qualify for SEISS, there is no business A and business B, there is just one business - you. Regardless how many trading names/sources you use. 

unholyangel

g1969 said:

I have a problem on this one.
I was employed in 16/17 so I guess that is not taken into account. In 17/18 I was employed and self employed  for which i made 30k from employment and a 12k loss on self employment. In 18/19 I was self employed and lets say 16k profit. So the way I looked at this was as my employment in 17/18 was greater than SE in 17/18 and 18/19 that would not make me  eligible for a grant as it needs to be 50% or greater to claim. So I thought my claim would be based on 18/19 only. However HMRC has added them together. I have appealed on the basis i am not eligible to claim over the 2 year period and believe I am over 1 year 18/19.  My money is down 90% on what it would have been. Any thoughts? 

I would expect your appeal to be rejected. Rules are crystal clear with SEISS (unlike parts of CJRS). 

6.1 The amount of the SEISS payment is the lower of-
(a) £7,500, and
(b) 3 × ( 𝑇𝑃 12 × 80%).

6.2 In paragraph 6.1, TP is–
(a) except where the person is subject to the loan charge, determined by the first to apply of the following paragraphs- 
(i) if the person carried on a trade in the tax years 2016-17, 2017-18 and 2018- 19, the average trading profits of those tax years,
(ii) if the person did not carry on a trade in the tax year 2016-17, the average trading profits of the tax years 2017-18 and 2018-19, and
(iii) if the person did not carry on a trade in the tax year 2017-18, the trading profits of the tax year 2018-19

The directions given to them by the treasury do not permit them any discretion to ignore your 17/18 trading income. You traded in the 17/18 year and did not trade in the 16/17 year therefore they need to take the average of the 17/18 & 18/19 years. 

ad_man

‘I have never understood why anyone uses the cash basis for anything but the simplest circumstances, and this is an extremely good reason not to’.

Regardless of your point of view it’s used by many of those self employed and I was correct with my information re sideways loss relief.

‘I have a problem on this one.
I was employed in 16/17 so I guess that is not taken into account. In 17/18 I was employed and self employed  for which i made 30k from employment and a 12k loss on self employment. In 18/19 I was self employed and lets say 16k profit. So the way I looked at this was as my employment in 17/18 was greater than SE in 17/18 and 18/19 that would not make me  eligible for a grant as it needs to be 50% or greater to claim. So I thought my claim would be based on 18/19 only. However HMRC has added them together. I have appealed on the basis i am not eligible to claim over the 2 year period. My money is down 90% on what it would have been. Any thoughts?’ 

In short, unfair.

‘Yes it's a fair way because if you qualify for SEISS, there is no business A and business B, there is just one business - you. Regardless how many trading names/sources you use.’

I beg to disagree. 

On what is ‘fair' incidentally, I am somewhat outraged with one of the reasons HMRC gave for having the self employed wait until mid May to claim SEISS – in order to allow those who had yet to file tax returns for 18/19  to file by end of April. Why is that fair to those who year after year make sure to file their returns on time? Those who were late in filing returns - unless for an incredibly  good reason - should in my view have been blocked from claiming the grant and furthermore fined a penalty for non filing. That would have been the best (and at no cost) advertisment warning ever for getting ones tax returns in on time.