SEISS 'adversely affected' if I bought extra WFH equipment (+more qs)?

KDuffy

Hi all,
I've been struggling to decide whether I can honestly say my business (freelance illustration) has been adversely affected or not, so I haven't yet claimed SEISS- but as the deadline is coming up I thought I'd see if I can find some advice.

- I work a portion of my business from home during a normal year, but because I was due to spend my full time at home- I bought a more permanent work set-up to enable a closer efficiency to the office I rent in town. This was a relatively cheap £600 screen I use to draw on. 

- Usually, I work on various short-form jobs here and there with a week or so (of no-work) inbetween. During these last few months however I've been lucky enough to land 2 longer jobs. I've had maybe 2 weeks (and the odd day) with no work- but the rest of the time I've been in full-time business. Thanks to these longer jobs I have worked and earned much more than I usually would during this period, but I've had fewer clients (I usually work on 4-6 different projects between March and July).

With fewer enquiries (but longer jobs) my business is profiting more but I fear for the time these jobs dry up.
I realise this is an incredibly privileged position to be in.
- Am I affected if I'm earning more but finding a shift in my new business? 
- Does buying new equipment to work from home count towards being affected?
- In April, I received the small business relief grant in order to help keep up with the costs of renting the office in town I haven't used since March, is this something I should factor in?

Thanks guys!!

Jeremy535897

There is one fundamental question here, which is whether your business has to be adversely affected by coronavirus as a whole, or will one adverse effect suffice, even if outweighed by positive effects?

The legislation for SEISS 1 just says:
 "3.3 A claim may only be made in relation to a trade the business of which has been adversely affected by coronavirus or coronavirus disease."
The guidance says:

"Your business could be adversely affected by coronavirus if, for example:

• you’re unable to work because you:
  • are shielding
  • are self-isolating
  • are on sick leave because of coronavirus
  • have caring responsibilities because of coronavirus
• you’ve had to scale down or temporarily stop trading because:
  • your supply chain has been interrupted
  • you have fewer or no customers or clients
  • your staff are unable to come in to work

Find examples of when the ‘adversely affected’ criteria will be met. "

The examples dodge the issue of whether it is the overall effect that matters. 

Scenario 5 says " He also had increased costs due to buying protective equipment." which could mean that the extra £600 spent on equipment is an adverse effect.

There are a number of claimants who will be better off as a result of claiming the grant than they would have been if coronavirus had not happened, and it is clear that this is not a reason to stop you claiming a grant. Does that indicate that the adverse effect does not have to be an overall effect? I don't think it does.

When faced with a question like this, where the legislation does not answer it, perhaps the best solution is to apply the test of what the person in the street would say. I think that person would say that you got £10,000 from the government, your income hasn't gone down in any measurable way, and you still have the £600 worth of equipment, so you have not been adversely affected by coronavirus, and don't qualify for the grant. It does highlight whether virtually any very small business that also got the £10,000 grant could claim SEISS (they did not have to show their business was adversely affected by coronavirus to be able to receive this grant).

Grumpy_chap

Jeremy535897 said:

It does highlight whether virtually any very small business that also got the £10,000 grant could claim SEISS (they did not have to show their business was adversely affected by coronavirus to be able to receive this grant).

Two types of business that are likely to have received the £10k grant or, possibly the larger £25k retail & hospitality grant) and still adversely impacted:

• single-person barber shop
• husband & wife coffee shop or cafe

Back to the OP's case, this is very marginal as to what constitutes adversely impacted.  Clearly, the OP had to change how they work (from home rather than business premises) and had to purchase a relatively small amount of equipment to facilitate this (the equipment would go on the 'balance sheet' if a Ltd Co).  However, the OP states no loss of revenue over the period so far and may have made efficiencies to off-set the equipment costs (e.g. no commuting).  This may even result in a long-term net gain if the OP assesses that they can deliver the same amount of turnover in the future and achieve the efficiency of not needing to fund the business premises.

I think another thing to consider is whether the OP can claim the second SEISS grant even if the first SEISS grant has not been claimed.  I do not know the rules in this regard:

• I can see how the rules would have been written to assume the second grant eligibility is contingent upon the first being claimed.  If the consideration was only that the business has been impacted in April - May - June but by 14th July, things are returning back to normal so the business should be recovering and may have no further on-going negative impact.  This could apply to a construction operative, for example who is impacted while the site is shut down but ceases to be impacted once the site re-opens.
• The OP has a different circumstance that Government may not have considered.  Able to work from home and continue delivering the three-months of order-book with no substantial adverse impact.  As that order book is now drying up, and because Client businesses were largely closed for the past three months, no new orders to build an order book for the next three months.  So, the event that causes reduced income happened in Apr-May-June but the OP's business will not see the adverse impact until July-Aug-Sept.

Ordinarily, I would advise the OP to seek advice from HMRC but as the deadline is so near, it is not certain that the OP will be able to get a response from HMRC in time.  It has been left rather late to ask the question.

I think, therefore, the OP need to print out the rules and guidance, review all careful and in detail and make a decision based on the overall status to the business.  If the OP decides to apply for the first SEISS grant, it will be helpful to record now (and share with Accountant or similar for review and record purposes) to record exactly why the OP determines that the business has been adversely affected, with clear links to exactly which part of the guidance the OP has assessed the eligibility against and determined eligible.  At least then, if the OP is audited in the future, there will be evidence based decision to rely upon.  If the worst happened and the HMRC decided the OP's rationale was incorrect, at least the OP has a defence and should be able to argue to return the grant as an erroneous claim, but not a fraudulent claim.  That will leave the OP in a better position than "I can have this free money, so why not?"  Doing and recording this exercise will also leave the OP with a clear conscience and avoid future wondering if the OP determines that the "adversely affected" criteria has not been met.

Jeremy535897

Grumpy_chap said:

Jeremy535897 said:

It does highlight whether virtually any very small business that also got the £10,000 grant could claim SEISS (they did not have to show their business was adversely affected by coronavirus to be able to receive this grant).

Two types of business that are likely to have received the £10k grant or, possibly the larger £25k retail & hospitality grant) and still adversely impacted:

• single-person barber shop
• husband & wife coffee shop or cafe

Back to the OP's case, this is very marginal as to what constitutes adversely impacted.  Clearly, the OP had to change how they work (from home rather than business premises) and had to purchase a relatively small amount of equipment to facilitate this (the equipment would go on the 'balance sheet' if a Ltd Co).  However, the OP states no loss of revenue over the period so far and may have made efficiencies to off-set the equipment costs (e.g. no commuting).  This may even result in a long-term net gain if the OP assesses that they can deliver the same amount of turnover in the future and achieve the efficiency of not needing to fund the business premises.

I think another thing to consider is whether the OP can claim the second SEISS grant even if the first SEISS grant has not been claimed.  I do not know the rules in this regard:

• I can see how the rules would have been written to assume the second grant eligibility is contingent upon the first being claimed.  If the consideration was only that the business has been impacted in April - May - June but by 14th July, things are returning back to normal so the business should be recovering and may have no further on-going negative impact.  This could apply to a construction operative, for example who is impacted while the site is shut down but ceases to be impacted once the site re-opens.
• The OP has a different circumstance that Government may not have considered.  Able to work from home and continue delivering the three-months of order-book with no substantial adverse impact.  As that order book is now drying up, and because Client businesses were largely closed for the past three months, no new orders to build an order book for the next three months.  So, the event that causes reduced income happened in Apr-May-June but the OP's business will not see the adverse impact until July-Aug-Sept.

Ordinarily, I would advise the OP to seek advice from HMRC but as the deadline is so near, it is not certain that the OP will be able to get a response from HMRC in time.  It has been left rather late to ask the question.

I think, therefore, the OP need to print out the rules and guidance, review all careful and in detail and make a decision based on the overall status to the business.  If the OP decides to apply for the first SEISS grant, it will be helpful to record now (and share with Accountant or similar for review and record purposes) to record exactly why the OP determines that the business has been adversely affected, with clear links to exactly which part of the guidance the OP has assessed the eligibility against and determined eligible.  At least then, if the OP is audited in the future, there will be evidence based decision to rely upon.  If the worst happened and the HMRC decided the OP's rationale was incorrect, at least the OP has a defence and should be able to argue to return the grant as an erroneous claim, but not a fraudulent claim.  That will leave the OP in a better position than "I can have this free money, so why not?"  Doing and recording this exercise will also leave the OP with a clear conscience and avoid future wondering if the OP determines that the "adversely affected" criteria has not been met.

The second grant is not contingent on the first. See this scenario in :https://www.gov.uk/guidance/how-different-circumstances-affect-the-self-employment-income-support-scheme#adversely-affected-examples
 

Scenario 4

A builder was able to work as normal from February 2020 to August 2020 because she works on small house extensions which are completely outdoors. However, she caught coronavirus in August 2020, meaning she was unable to work for 6 weeks while she recovered.

Adversely affected	Is the condition met?
First grant	No
Second grant	Yes

Icequeen1

I would say it is really up to you in this case and I agree with the man in the street test. You can't claim for a future possibility of a reduction in work - you must be adversely affected before 13 July (for example if a future contract was cancelled, then you are adversely affected, but not if you 'might' lose work or not get work). You would need to be happy you have enough evidence if HMRC ask you at a later date how you were adversely affected. If you work drops of later - you can claim grant 2. 

unholyangel

I would add that the wording of the direction is that the business of the trade needs to be affected by corona. You have to consider why they didn't just say carrying on a trade which has been adversely affected and why they chose to word it as carrying on a trade, the business of which has been adversely affected.

It's not as simple as it seems on the face of it. 

For example, if a trader breaks their leg - they wouldn't be eligible to claim despite their business being in a downturn, because it's not due to corona. 
If a customer cancels because they broke their leg, again....not due to corona. 
If a business has increased trade which means their profits are parallel to normal levels, it has not been adversely affected (whether it has increased costs due to corona or not). 

As for OP's scenario....well OP has told us they were due to spend their full time at home rather than their rented office, but they don't say why. Look at scenario 4 in the examples given - able to continue working as there were no restrictions on working outside on homes so not eligible. Or scenario 1 - still able to go to work on a small building site as could work within social distancing so not eligible. 

Then of course you have the OP saying they're earning more than usual. 

Grumpy_chap

unholyangel said:

It's not as simple as it seems on the face of it. 
If a business has increased trade which means their profits are parallel to normal levels, it has not been adversely affected (whether it has increased costs due to corona or not). 
Then of course you have the OP saying they're earning more than usual. 

I certainly don't think this measure is as simple as it seems on the face of it.

A business trades doing A and has an established and regular level of turnover at £10k / month.  Right up to and including March 2020.

• Coronavirus lock-down hits and the turnover doing A the way they always have drops to £5k / month April - definitely adversely affected.
• By May, the business has worked out how to be more efficient at doing A so manages to bring the turnover back to £7.5k /month but also starts doing B which generates £2.5k / month so total turnover is £10k / month May.
• By June, turnover for doing A recovers to the normal level £10k / month (because the business has adapted to circumstances) and the business can also continue doing B, which has grown to £5k / month so total turnover £15k / month June.

Over the three months, the business has turnover £30k, the same as would have been the case had lockdown never been applied. 
It is still possible to state that the business was adversely affected by coronavirus, just looking at April. 
Also, the turnover doing A was less over the 3 months, it is only because the business also started doing B that overall turnover was maintained. 
Who is to say that the business would not have started doing B in May with or without coronavirus, in which case total business turnover would have been £37.5k for the 3 months rather than the £30k realised?
On the other hand, maybe the drop in trade doing A (because of coronavirus) was the only prompt for the business to start doing B, but now the business will continue doing A (£10k / month) plus B (£5k / month) for ever.  Hence, the business has benefited long-term from coronavirus despite the initial adverse impact in April.  Perhaps this business should accept the £7.5k SEISS, but then pay the Government the profit from doing B for ever more?

Jeremy535897

There is a danger of overcomplicating it, clearly. What if I run two businesses, and one does worse because of coronavirus, and one is unaffected? Am I able to claim? I guess I am. What if business 2 actually improves because of coronavirus, more than offsetting the loss to business 1? Or what if business 2 does better than the disadvantage to business 1, but that improvement is not caused by coronavirus? What if it is caused by diverting resource from affected business 1 to business 2? Or they own a business that is unaffected, but are also partners in a partnership that is affected? That (and the fact that the IFS said it and nobody at HMRC seemed to worry) is one reason why I have been dismissive of fears by people who say their business didn't lose by as much as the grant, so will they be asked to pay it back, or the people that think their turnover may not reduce in the year overall because they will work longer hours later on catching up the backlog of customers?

I cannot see HMRC having either the time or the inclination to go through all this sort of thing. If they find them, they will tackle cases where it turns out that the claimant actually moved the sole trade into a company before the claim, or they made a vast increase in profit and it turns out their business is making ventilators or PPE, or it is some sort of business like a film partnership where the precise revenue streams and profit are known at the beginning, so couldn't be affected by coronavirus. But I've been wrong in my speculations before, so who knows?

KDuffy

OP here, glad to have started such an intense line of questioning on the murky nature of this support grant!

As I received the small business rates help earlier, I think I'm going to leave this one- 'The man on the street' test is very useful. I tend to think of myself in a court setting and whether or not I can shout my argument for the coronavirus adversely affecting business before July 13th, and I don't think I could: Profits are up- and while running costs are slightly higher (new equipment and the extra use of gas/electric on top of still paying to rent my office in town), they're nowhere near detrimental to overall cashflow.

To the poster who asked whether I still have access to my office in town- I do, but only for limited hours (10am-4pm), I don't know what the building manager's logic for this was but as I could work from home, I did. I've been quite anxious about the virus overall too.

I can continue with more small reasons this could have affected business, I had to do my parent's weekly food-shopping early on... I've been forced to use a slower laptop to complete my work etc but they feel like poor excuses to me. The only way I can truly think that it's affected business is if unbeknownst to me, some commissioners would have needed me for projects that have been cancelled due to the coronavirus. This is likely, but I can't prove it of course.

I'm mostly grateful to keep healthy and not have any major dependents during this time-  so I'm ok with it.

justwhat

What if the only effect on a business is the fact they have to outlay 10 quid on PPE per month. ??
The argument for claiming and not claiming gets over complicated. The claim is not entirely profit based. Profit can be irrelevant.
These grants were not implemented and designed to help just the recipient. They have been given knowing the recipient will hopefully spend it and keep others afloat. They were given to circulate money in the economy.
Again this is not a means tested, savings or profit based grant

You can't use the dude in the street analogy, its far too blinkered.(and he is prob a div and thinks no grant should be given lol)

Jeremy535897

justwhat said:

What if the only effect on a business is the fact they have to outlay 10 quid on PPE per month. ??
The argument for claiming and not claiming gets over complicated. The claim is not entirely profit based. Profit can be irrelevant.
These grants were not implemented and designed to help just the recipient. They have been given knowing the recipient will hopefully spend it and keep others afloat. They were given to circulate money in the economy.
Again this is not a means tested, savings or profit based grant

You can't use the dude in the street analogy, its far too blinkered.(and he is prob a div and thinks no grant should be given lol)

The "man in the street" test is a well known legal device. While the criteria for testing whether your business has been adversely affected by coronavirus include, for example, becoming ill with it yourself as a business owner, the examples in the guidance clearly demonstrate that you start with a financial loss or reduction in profit, and then look to the cause. It is the business that has to be adversely affected, not you or your employees. Being ill with coronavirus only counts if the business does worse without you (although one would hope it does, otherwise why are you bothering). It is true that there is no de minimis test, but if the only negative impact is extra costs due to PPE, and your sales have actually gone up, has your business really been adversely affected by coronavirus? You are back to the specific v aggregate test again, and I would say that if you are in business making PPE, and your profit massively increases, you can't claim the grant just because a worker was self isolating for 14 days, so your profits weren't as high as they might have been.