Clarification on SEISS eligibility

storysoldier

Hello
I have been self-employed since 2016. My income suffered in Mar-Apr 2020. I checked eligibility and applied for SEISS. I received the first grant. Since then I think I have claimed in error.
I set up a limited company in December 2019. Since January 2020 my invoices have been paid into the company account. I have not had any dividend or salary as a company director. I was under the impression that since I was self-employed the previous year (2018-19) as per the guidelines that I was eligible for the grant.
Have I claimed in error? The fact that I set up a company makes me ineligible?
Thanks for the help!

Jeremy535897

You transferred your sole trade to a limited company in January 2020, so therefore your SEISS claim was incorrect. The basic conditions are:

"Who can claim

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"

You didn't intend to continue to trade as a sole trader in 2020/21, because you ceased to trade in 2019/20. Your sole trade ceased before coronavirus adversely affected it. HMRC will have thought you are eligible because you had self employed income in 2018/19.

You will not be the only person to make this mistake. See:
https://www.litrg.org.uk/latest-news/news/200514-press-release-covid-19-grant-warning-new-limited-companies
It is a little out of date. Note 5 says to contact HMRC if you have accidentally claimed incorrectly. The legislation to recover incorrect claims is still in draft. Talk to your accountant. Do not wait for HMRC to find out. You are far better admitting your mistake now. Your 2019/20 return will reveal the cessation of trade to HMRC, but don't wait.

Grumpy_chap

Based on your self-employment you will have met most of the eligibility for SEISS but not, presumably, the element relating to "continues to trade and intends to continue to trade".  By the time SEISS came into existence, your sole-trader business had ceased trading when you converted to the Ltd Co in December last year.

Within the Ltd Co, you may have been eligible for furlough, but not if you had not set up a payroll by 19th March (which it sounds like you did not yet) and also you are now too late to be furloughed for the first time.

You may have claimed in error.  This is worth asking your Accountant to review.  I did read that there will be a process in place for people that made erroneous claims to return them without penalty under an amnesty.  If that is correct, at least there will not be action against you.

You may (Ltd Co) be eligible for BBLS as an alternative source of funds to tide you over.

storysoldier

Thank you. Do I just ring HMRC on their general line to inform them? 

Jeremy535897

storysoldier said:

Thank you. Do I just ring HMRC on their general line to inform them? 

Do you not have an accountant? They should advise.

antonic

storysoldier said:

Thank you. Do I just ring HMRC on their general line to inform them? 

Yes, ring them on 0800 024 1222 and advise them of the situation.
At present there is no mechanism for you to repay the grant, so put the money aside and await them contacting you to repay.

storysoldier

Thank you all for your help. 

fazer169

Would becoming a limited company director prevent you from continuing to trade as self employed in 2020/21 alongside your director employment?  Even if the business was transferred  to the limited company you could continue to trade unless you have informed HMRC that you have ceased to be self employed.  Your continued self employment would not have to be the same business.  You could clean a few windows.

Grumpy_chap

fazer169 said:

Would becoming a limited company director prevent you from continuing to trade as self employed in 2020/21 alongside your director employment?  Even if the business was transferred  to the limited company you could continue to trade unless you have informed HMRC that you have ceased to be self employed.  Your continued self employment would not have to be the same business.  You could clean a few windows.

No, being a Ltd Co Director does not prevent you from also carrying on sole trader business.  That would be an unusual arrangement.
The most likely time to notify cessation of sole trader self-employment would be with the 2019-20 tax return submission.
However, what you suggest about cleaning windows, in the context of the OP, would likely be fraud.  At the time of making the claim for SEISS, the OP was not trading and did not intend to continue trading.  If the OP starts a new sole-trader business, say 11th July, that new business was not trading at the qualifying date for SEISS.

[Deleted User]

How can the HMRC prove or disprove ‘intent’?

Grumpy_chap

In the OP's case it is not so much about 'intent' as fact.  
Fact - the OP was trading as sole trader
Fact - the OP set up Ltd Co in December
Fact - the OP only traded through Ltd Co since January
Fact - the OP no longer trades as sole trader since December

In the event of any investigation, it will not be for the HMRC to prove "intent" but for the defendant.  In the light of the OP, the subsequent proving of intent would be nigh on impossible against the facts.  

The OP has asked for advice and received good advice and accepted that advice.  Now we have other people trying to campaign on the OP's behalf and get the OP into #Excluded - not fair.