SEISS declined due to Maternity Allowance

Hbo

Is there likely to be any review to catch the gaps in SEISS system? My claim was declined because i was on maternity allowance in 18-19 so income from self employment was reduced. This feels like discrimination for having a baby, and should be resolved now it has been recognised as a hole on the system? Anyone have any success with a review? Hmrc said they would review it again, after no reaponse i called and the case had been closed without further notification. 

Jeremy535897

I assume you mean that as a result your self employed income was less than other taxable income? Maternity allowance does not figure in either self employed income or other taxable income.

Hbo

Jeremy535897 said:

I assume you mean that as a result your self employed income was less than other taxable income? Maternity allowance does not figure in either self employed income or other taxable income.

 Yes, income for 18-19 includes small self employed income subsidised with Maternity allowance, and rental property income. If i hadnt been on maternity leave and in receipt of MA my self employed income would have been higher and therefore within the criteria. Thanks 

Jeremy535897

Were you self employed in 2016/17 and/or 2017/18 as well? If so, they should also look at the two or three years together, if you fail the test on 2018/19 figures.

Hbo

Jeremy535897 said:

Were you self employed in 2016/17 and/or 2017/18 as well? If so, they should also look at the two or three years together, if you fail the test on 2018/19 figures.

 I was self employed 17/18 but not 16/17. Will they use an average or look at 17/18 in isolation?

For 18/19 net s/e profit £700, taxable property income £3530, other taxable £5662 (this is maternity allowance and from what you have said i may have included this in error on the 18/19 return?)

For 17/18 s/e profit £4582, taxable property income £2341.

Any advice on what can be done is appreciated. 

Jeremy535897

That is unfortunate. You fail the 50% test in 2018/19, because your other taxable income exceeds your self employed income. Maternity allowance (as opposed to statutory maternity pay) is not taxable and should not be included on your tax return, but even without including it, the property income exceeded your self employment income. So far as tax due in 2018/19 is concerned, your personal allowance of £11,850 exceeded all your income including the maternity allowance, so incorrectly including it is harmless on that point.

If you fail the 50% test in 2018/19, they then look at 2017/18 and 2018/19 in aggregate, as you were not self employed in 2016/17. If you include maternity allowance, total income for 2017/18 and 2018/19 was £16,815, and self employed income was £5,282, which is less than 50% of total income, which is why your claim has been rejected. If you exclude the maternity allowance, total taxable income for 2017/18 and 2018/19 was £11,153, and your self employed income of £5,282 was still less than 50% of that, so even if you had completed the tax return correctly, you would not have been eligible.

For most of the time, maternity allowance being tax free is a benefit to self employed mothers, but in this case it has worked against you, because if you could have included it in your self employed profits, you would have received a grant. I suppose the counter argument is that you have already had a (tax free) benefit from the government of your maternity allowance, and it would be very generous to pay a grant based on government payments.

Dazed_and_C0nfused

One minor consolation is that if the op is married and haven't already done so they may be able to benefit (as part of a couple) from applying for Marriage Allowance for both years.

Hbo

Jeremy535897 said:

That is unfortunate. You fail the 50% test in 2018/19, because your other taxable income exceeds your self employed income. Maternity allowance (as opposed to statutory maternity pay) is not taxable and should not be included on your tax return, but even without including it, the property income exceeded your self employment income. So far as tax due in 2018/19 is concerned, your personal allowance of £11,850 exceeded all your income including the maternity allowance, so incorrectly including it is harmless on that point.

If you fail the 50% test in 2018/19, they then look at 2017/18 and 2018/19 in aggregate, as you were not self employed in 2016/17. If you include maternity allowance, total income for 2017/18 and 2018/19 was £16,815, and self employed income was £5,282, which is less than 50% of total income, which is why your claim has been rejected. If you exclude the maternity allowance, total taxable income for 2017/18 and 2018/19 was £11,153, and your self employed income of £5,282 was still less than 50% of that, so even if you had completed the tax return correctly, you would not have been eligible.

For most of the time, maternity allowance being tax free is a benefit to self employed mothers, but in this case it has worked against you, because if you could have included it in your self employed profits, you would have received a grant. I suppose the counter argument is that you have already had a (tax free) benefit from the government of your maternity allowance, and it would be very generous to pay a grant based on government payments.

Thank you for your explanation. I see whata happened, although i dont agree with HMRCs treatment of maternity leave and subsequent reduced s/e income.

Its almost ironic now that the property income that has knocked out the calculation is now not being paid due to the tenants difficulty with the SEISS system.  Thanks for your clarification 

calcotti

There is a legal action under way on discrimination grounds to challenge the way pregnant women have been treated under the SEISS. See https://www.leighday.co.uk/News/Press-releases-2020/June-2020/Pregnant-Then-Screwed-takes-first-step-towards-leg

Jeremy535897

This may help you:
https://www.gov.uk/government/news/self-employed-new-parents-can-claim-support-grant