More SEISS doubts

lisastevo

leopoldo_2 said:

Just to add fuel to the fire, on this thread on the HMRC forum, towards the end the Admin seems to suggest that you only need to count earnings, previous grants do not count: https://community.hmrc.gov.uk/forums/customerforums/sa/8b8b1039-882d-eb11-8441-00155d3ba99e

"When considering your eligibility for the third instalment, any amounts previously received from the first and second instalments would NOT be considered as trading profits."

I'm not sure that this is gospel and someone has asked for confirmation that this is the case but it's worth monitoring. I don't intend to claim if I can help it but it would be good to know.

Interesting. Who are the admins?! HMRC employees? I just wish they would update the guidance either way, a straight yes or no would be nice 👍🏻 

leopoldo_2

lisastevo said:

leopoldo_2 said:

Just to add fuel to the fire, on this thread on the HMRC forum, towards the end the Admin seems to suggest that you only need to count earnings, previous grants do not count: https://community.hmrc.gov.uk/forums/customerforums/sa/8b8b1039-882d-eb11-8441-00155d3ba99e

"When considering your eligibility for the third instalment, any amounts previously received from the first and second instalments would NOT be considered as trading profits."

I'm not sure that this is gospel and someone has asked for confirmation that this is the case but it's worth monitoring. I don't intend to claim if I can help it but it would be good to know.

Interesting. Who are the admins?! HMRC employees? I just wish they would update the guidance either way, a straight yes or no would be nice 👍🏻 

The Admins are the people on the forum who answer any queries, they each have generic usernames, HMRC Admin 1, HMRC Admin 2, etc. As it is an official HMRC forum they would have to be employees (I assume).

Grumpy_chap

leopoldo_2 said:

Just to add fuel to the fire, on this thread on the HMRC forum, towards the end the Admin seems to suggest that you only need to count earnings, previous grants do not count: https://community.hmrc.gov.uk/forums/customerforums/sa/8b8b1039-882d-eb11-8441-00155d3ba99e

"When considering your eligibility for the third instalment, any amounts previously received from the first and second instalments would NOT be considered as trading profits."

I'm not sure that this is gospel and someone has asked for confirmation that this is the case but it's worth monitoring. I don't intend to claim if I can help it but it would be good to know.

That is interesting.  As the HMRC guidance is clear that the SEISS grants are subject to income tax and self-employed NI (https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme), this will need the tax return modified so that trading profits cascade down but then SEISS is introduced rather later.  I had previously assumed that SEISS would be entered at box 10 on SA103s (other business income), which is very quickly simply added to box 9 (turnover) and then cascades down together for all purposes.  It may be worth watching that thread to see if there is a correction...

Jeremy535897

I think HMRC have already said that a separate box to enter SEISS grants into will feature in the 2020/21 return (and possibly 2021/22, depending on when SEISS 4 is taxable). That doesn't change the fact that the legislation says the grants are trading profits though.

Grumpy_chap

I still assumed that the "SEISS" box would be effectively a box 10a.  If SEISS is to feed down, but excluded from trading profits, the mechanism of bringing it into the tax calculation will need to be revised.

Jeremy535897

I think that is exactly where it will go. The legislation says it is part of trading profits in paragraph 1 schedule 16 FA 2020:

"1(1)This paragraph applies if a person carrying on, or who carried on, a business (whether alone or in partnership) receives a coronavirus support payment that is referable to the business.

(2)So much of the coronavirus support payment as is referable to the business is a receipt of a revenue nature for income tax or corporation tax purposes and is to be brought into account in calculating the profits of that business—

(a)under the applicable provisions of the Income Tax Acts, or

(b)under the applicable provisions of the Corporation Tax Acts."

That is why I think the comment in the forum is wrong, and no amount of guidance can change the clear wording of the law. I can quite see why HMRC want to see it in a separate box, so they can check it is correct.

leopoldo_2

I didn't take his comment to mean that the grants wouldn't be considered taxable profits, only that they wouldn't be considered part of the taxable profits used to determine eligibility for the 3rd grant. 

Grumpy_chap

leopoldo_2 said:

I didn't take his comment to mean that the grants wouldn't be considered taxable profits, only that they wouldn't be considered part of the taxable profits used to determine eligibility for the 3rd grant. 

I don't understand how the two can be separated.

leopoldo_2

I'm not sure if he's got it right (the wording on the HMRC website about eligibility could be interpreted either way) but it does suggest that other grants should be excluded when determining whether there has been a significant reduction in the year's taxable profits. If so I suspect that a lot more people would claim.

Jeremy535897

leopoldo_2 said:

I'm not sure if he's got it right (the wording on the HMRC website about eligibility could be interpreted either way) but it does suggest that other grants should be excluded when determining whether there has been a significant reduction in the year's taxable profits. If so I suspect that a lot more people would claim.

Guidance can only interpret the legislation, not contradict it, or what would be the point of legislation. Schedule 16 FA 2020 treats the SEISS grants as part of trading profits (see earlier post). The SEISS 3 legislation says:
" 4.2. Subject to paragraph 4.3, a claim may only be made for a SEISS 3 payment in respect of the period beginning on 1 November 2020 and ending on 29 January 2021 (“the qualifying period”) in relation to a trade—

(a)the business of which has suffered reduced activity, capacity or demand in that period from that which could reasonably have been expected but for the adverse effect on the business of coronavirus or coronavirus disease, and

(b)which the claimant reasonably believes will suffer a significant reduction in trading profits for a relevant basis period from that which would otherwise have reasonably been expected as a result of that reduced activity, capacity or demand.

4.3. A claim cannot be made under paragraph 4.2 in relation to any reduced activity, capacity or demand caused solely because the person is required to self-isolate, or care for a person required to self-isolate, as a result of travelling to the United Kingdom.

4.4. On a claim by a relevant person, paragraphs 7 (profits condition) and 9 (relevant income for relevant reservists) of SEISS Extension apply in determining whether the person is a qualifying person for the purposes of the claim.

4.5. For the purposes of paragraph 4.2—

“relevant basis period” means a basis period or basis periods in which the qualifying period falls;

“basis period” has the same meaning as in Chapter 15 of Part 2 of ITTOIA 2005."

Section 198(1) ITTOIA 2005 says:

"(1)The general rule is that the basis period for a tax year is the period of 12 months ending with the accounting date in that tax year."

I don't see any scope here for Admin 14's view, but I would love someone to prove me wrong.