Self Employed SEISS Furlough Grant Application Refused Due To New Van Purchase ???

DougLlewellyn

I have been self-employed & vat registered  for 20 years, all accounts etc filed fine but have been refused the self-employed Furlough equivalent grant “SEISS” payment,

I made a working profit in all three of the years HMRC consider for SEISS however in one of the years I bought myself a new van for work, I paid for the van outright from the business account and then put it in my accounts as an outgoing invoice / expense so as to claim the vat back on the purchase etc etc but this big capital purchase in that year then caused one of the three years to show a small loss – Hence my application SEISS has been refused since i didn't make a "profit" in all three years – Shouldn’t they somehow spread “capital asset” purchases over 5 years or something when making these SEISS eligibility calculations ? Seems a tad unfair – as I suspect a lot of self-employed people have made some form of capital asset purchase over the last three years and are having their SEISS claims affected or rejected ?? - Anyone else out there had a similar issue with HMRC ???

calcotti

That doesn't make sense - there is no requirement to make a profit in all three years.
The eligibility test is based on what happened in 2018-19 or the average of 2016-17, 2017-18 and 2018-19.
https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme#check

You can claim if you’re a self-employed individual or a member of a partnership and all of the following apply:

• you traded in the tax year 2018 to 2019 and submitted your Self Assessment tax return on or before 23 April 2020 for that year
• you traded in the tax year 2019 to 2020

• you intend to continue to trade in the tax year 2020 to 2021

• you carry on a trade which has been adversely affected by coronavirus

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To work out your eligibility we will first look at your 2018 to 2019 Self Assessment tax return. Your trading profits must be no more than £50,000 and at least equal to your non-trading income.

If you’re not eligible based on the 2018 to 2019 Self Assessment tax return, we will then look at the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019.

calcotti

Or are you saying that, although eligible, your profit averaged over the three years is nil in which case they are calculating the amount payable as 80% x nil = nil.

DougLlewellyn

Hi - Yes that was my understanding but the letter received back from HMRC does seem to quite clearly blame the fact that i "did not make a profit of between £0 & £50k in all three years" as the reason for application rejection - Is it possible that some HMRC employees don't understand the rules fully and have made a mistake - if so where do i go next as there isn't any info on appealing the decision on the letter - Thanks - Doug

LilElvis

Yes, you claim back the VAT on capital purchases but you don't then charge the total cost of the van against profits in the year of purchase! Is this what you did? Do you use an accountant?

[Deleted User]

@DougLlewellyn
If you can confirm, what profit (or loss) did you make in each of the three relevant years, 16/17, 17/18 and 18/19?

Thrugelmir

Would appear that your accounting treatment of the van was incorrect. Suggest you speak to an accountant. 

Jeremy535897

LilElvis said:

Yes, you claim back the VAT on capital purchases but you don't then charge the total cost of the van against profits in the year of purchase! Is this what you did? Do you use an accountant?

Why not? It would qualify for 100% annual investment allowance.

Turning to OP's issue, a loss is averaged with the profits, but if OP has other taxable income that might have resulted in the 50% test being failed (but unlikely unless the year concerned was 2018/19). Guidance example from https://www.gov.uk/guidance/how-hmrc-works-out-total-income-and-trading-profits-for-the-self-employment-income-support-scheme here:

If you have traded for all 3 tax years

To work out your average trading profit we add together all profits and losses for all 3 tax years that you’ve had continuous trade, then divide by 3.

Example

	2016 to 2017	2017 to 2018	2018 to 2019	Average trading profit for the 3 tax years
Trading profit or loss	£60,000	£60,000	-£30,000 loss	£30,000

Jeremy535897

To dispute their claim of ineligibility, see https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme#extension :

If you’re not eligible

We have used the information you or your tax agent or adviser sent us on your Self Assessment tax returns to work out your eligibility.

If you submitted your returns between 26 March 2020 and 23 April 2020 check your eligibility again as the online service has been updated.

If you think you are eligible, you should first check who can claim or contact your tax agent or adviser for help.

If you still think you should be able to claim you can ask HMRC to review your eligibility.