More SEISS doubts

dg121

Do they have any expected time frame on response from HMRC on this?

Jeremy535897

dg121 said:

Do they have any expected time frame on response from HMRC on this?

Not that I am aware.

itsmeagain

Jeremy535897 said:

Read https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme and
https://www.gov.uk/guidance/how-your-trading-conditions-affect-your-eligibility-for-the-self-employment-income-support-scheme 

I suspect it is this paragraph that causes concern:
"Before you make a claim, you must decide if the impact on your business will cause a significant reduction in your trading profits for the tax year you report them in."
It does not say
"Before you make a claim, you must decide if the impact on your business will cause a significant reduction in your trading profits for the tax year you report them in compared with last year."
What I believe it means is
"Before you make a claim, you must decide if the impact on your business for the period 1 November 2020 to 29 January 2021 will cause a significant reduction in your trading profits for the tax year you report them in compared with what you would have expected your trading profits for the tax year you report them in if there had been no coronavirus." The phrase "for the tax year you report them in" is put in because for some people 1 November 2020 to 29 January 2021 will fall in 2020/21, for some people that period will fall in 2021/22, and for others it will fall partly in 2020/21 and partly in 2021/22 (depending when your accounts are made up to).

I haven't read the rest of the thread yet but I'm not sure that the above assumptions are correct. The website says...

"How HMRC works out your eligibility based on your tax returns

To work out your eligibility we will first look at your 2018 to 2019 Self Assessment tax return.

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."

This suggests that we should NOT compare to last year (that you may not have done the tax return for yet), but the year before. If you are not eligible, you can then check if you would be eligible when including previous 2 tax years (somehow). None of these 3 years include last year.

Grumpy_chap

Compare what this year would be without COVID versus this year with COVID.  Past years are irrelevant, but may be a guide in some cases.

EDIT FOR CLARITY:
1. Eligibility for SEISS 1, 2, or 3 is based on the tax years 2016-7, 2017-8, 2018-9.  2019-20 is not considered.  The same periods are used to work out the amount of grant that is payable.
2. SEISS 3 also requires that there is a business impact (activity, capacity, demand) in the period Nov-Dec-Jan and that impact results in significant reduction in trading profits.  The reduction in profits is over the full accounting year.
3. I interpret that to mean that the earlier grants are included in the profits and whether there has been a significant reduction.  Others have expressed a differing interpretation.  It would be helpful if there is guidance from HMRC, but no-one can be confident such guidance will be forthcoming.
4. The reduction in profits is what the business would have done this year (without COVID) compared to what the business can do (with COVID).  For this purpose, comparisons to previous years are irrelevant.  That rather assumes that small business and sole-traders have a developed business plan however, if the "business plan" amounts to informally thinking "we'll do the same as last year", then comparison to last year would be appropriate.

Please do read the full thread as I don't think anyone can add anything that is substantially going to move the conversation forwards.

Jeremy535897

itsmeagain said:

Jeremy535897 said:

Read https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme and
https://www.gov.uk/guidance/how-your-trading-conditions-affect-your-eligibility-for-the-self-employment-income-support-scheme 

I suspect it is this paragraph that causes concern:
"Before you make a claim, you must decide if the impact on your business will cause a significant reduction in your trading profits for the tax year you report them in."
It does not say
"Before you make a claim, you must decide if the impact on your business will cause a significant reduction in your trading profits for the tax year you report them in compared with last year."
What I believe it means is
"Before you make a claim, you must decide if the impact on your business for the period 1 November 2020 to 29 January 2021 will cause a significant reduction in your trading profits for the tax year you report them in compared with what you would have expected your trading profits for the tax year you report them in if there had been no coronavirus." The phrase "for the tax year you report them in" is put in because for some people 1 November 2020 to 29 January 2021 will fall in 2020/21, for some people that period will fall in 2021/22, and for others it will fall partly in 2020/21 and partly in 2021/22 (depending when your accounts are made up to).

I haven't read the rest of the thread yet but I'm not sure that the above assumptions are correct. The website says...

"How HMRC works out your eligibility based on your tax returns

To work out your eligibility we will first look at your 2018 to 2019 Self Assessment tax return.

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."

This suggests that we should NOT compare to last year (that you may not have done the tax return for yet), but the year before. If you are not eligible, you can then check if you would be eligible when including previous 2 tax years (somehow). None of these 3 years include last year.

You are reading the wrong bit. Reference to 2016/17 to 2018/19 is for working out whether the basic criteria are met (trading exceeds non-trading,  profits under £50,000) and the quantum of the profits used for the claim.

itsmeagain

Jeremy535897 said:

 The past grants don't come into it. They can't. To claim SEISS 3, you had to be eligible to claim SEISS 1 and 2. For most people, that means they actually claimed SEISS 1 and 2. It would be absurd to say you had to be able to claim SEISS 1 and 2 to get SEISS 3, but if you did claim SEISS 1 and 2 you can't claim SEISS 3.

On that basis you could be down 5% each month (without grants), claim your 80/70/80/tba% grant and be up overall by circa 70% more than previous years.

It would be similar to coming up with a furlough scheme where an employee works 95% of their time, to get 95% pay and the government pays 80% of original salary on top, thus getting 175% pay overall for doing 5% less! Now that would be absurd. Count me in - I'll have 2 of those please!

You could be right but it would waste of government money and cause an increase of future taxes to pay back the money that these people shouldn't have got in the 1st place. 

Grumpy_chap

itsmeagain said:

Jeremy535897 said:

 The past grants don't come into it. They can't. To claim SEISS 3, you had to be eligible to claim SEISS 1 and 2. For most people, that means they actually claimed SEISS 1 and 2. It would be absurd to say you had to be able to claim SEISS 1 and 2 to get SEISS 3, but if you did claim SEISS 1 and 2 you can't claim SEISS 3.

On that basis you could be down 5% each month (without grants), claim your 80/70/80/tba% grant and be up overall by circa 70% more than previous years.

It would be similar to coming up with a furlough scheme where an employee works 95% of their time, to get 95% pay and the government pays 80% of original salary on top, thus getting 175% pay overall for doing 5% less! Now that would be absurd. Count me in - I'll have 2 of those please!

You could be right but it would waste of government money and cause an increase of future taxes to pay back the money that these people shouldn't have got in the 1st place. 

Yes, except SEISS 3 requires that you also declare your "reasonable belief" that there has been a "significant" reduction in profits over the accounting year.  In the example you cite, that belief would not be reasonable.

itsmeagain

Grumpy_chap said:

itsmeagain said:

Jeremy535897 said:

 The past grants don't come into it. They can't. To claim SEISS 3, you had to be eligible to claim SEISS 1 and 2. For most people, that means they actually claimed SEISS 1 and 2. It would be absurd to say you had to be able to claim SEISS 1 and 2 to get SEISS 3, but if you did claim SEISS 1 and 2 you can't claim SEISS 3.

On that basis you could be down 5% each month (without grants), claim your 80/70/80/tba% grant and be up overall by circa 70% more than previous years.

It would be similar to coming up with a furlough scheme where an employee works 95% of their time, to get 95% pay and the government pays 80% of original salary on top, thus getting 175% pay overall for doing 5% less! Now that would be absurd. Count me in - I'll have 2 of those please!

You could be right but it would waste of government money and cause an increase of future taxes to pay back the money that these people shouldn't have got in the 1st place. 

Yes, except SEISS 3 requires that you also declare your "reasonable belief" that there has been a "significant" reduction in profits over the accounting year.  In the example you cite, that belief would not be reasonable.

In the minds of some people on here (and Martin), 5% reduction is significant, and even if you replace the 5% with 20%, the principle that I have described is still unchanged.

Jeremy535897

itsmeagain said:

Jeremy535897 said:

 The past grants don't come into it. They can't. To claim SEISS 3, you had to be eligible to claim SEISS 1 and 2. For most people, that means they actually claimed SEISS 1 and 2. It would be absurd to say you had to be able to claim SEISS 1 and 2 to get SEISS 3, but if you did claim SEISS 1 and 2 you can't claim SEISS 3.

On that basis you could be down 5% each month (without grants), claim your 80/70/80/tba% grant and be up overall by circa 70% more than previous years.

It would be similar to coming up with a furlough scheme where an employee works 95% of their time, to get 95% pay and the government pays 80% of original salary on top, thus getting 175% pay overall for doing 5% less! Now that would be absurd. Count me in - I'll have 2 of those please!

You could be right but it would waste of government money and cause an increase of future taxes to pay back the money that these people shouldn't have got in the 1st place. 

We still do not know whether you have to include past grants in profits to see whether your trading profits for the current year are expected to be "significantly reduced". I think it is illogical. HMRC admin 14, whoever that was, said they were not included. But schedule 16 FA 2020 treats grants as part of 2020/21 trading profits.

We already have the situation where someone who bought a few masks at the right times could argue that justified a claim for SEISS 1 and 2. All this stuff about "significant reduction in trading profits" is designed to make those claims rarer, but the result is something that really doesn't work properly.

Grumpy_chap

itsmeagain said:

Grumpy_chap said:

itsmeagain said:

Jeremy535897 said:

 The past grants don't come into it. They can't. To claim SEISS 3, you had to be eligible to claim SEISS 1 and 2. For most people, that means they actually claimed SEISS 1 and 2. It would be absurd to say you had to be able to claim SEISS 1 and 2 to get SEISS 3, but if you did claim SEISS 1 and 2 you can't claim SEISS 3.

On that basis you could be down 5% each month (without grants), claim your 80/70/80/tba% grant and be up overall by circa 70% more than previous years.

It would be similar to coming up with a furlough scheme where an employee works 95% of their time, to get 95% pay and the government pays 80% of original salary on top, thus getting 175% pay overall for doing 5% less! Now that would be absurd. Count me in - I'll have 2 of those please!

You could be right but it would waste of government money and cause an increase of future taxes to pay back the money that these people shouldn't have got in the 1st place. 

Yes, except SEISS 3 requires that you also declare your "reasonable belief" that there has been a "significant" reduction in profits over the accounting year.  In the example you cite, that belief would not be reasonable.

In the minds of some people on here (and Martin), 5% reduction is significant, and even if you replace the 5% with 20%, the principle that I have described is still unchanged.

This is every bit the reason why the "reasonable belief" of "significant" reduction in profits has to take into account the previous grants received (which is income "because of COVID" to off-set the reduction "because of COVID").

Jeremy has set out the ambiguity around that - it rather seems as though the mystery HMRC ADMIN14 is incorrect because what they stated is entirely illogical.

I don't think this conversation is actually progressing or exploring any new elements.