SEISS 5 grant and 30% profit reduction calculation.

Jeremy535897

Doing your 2020/21 accounts "early" is not actually the requirement. You have to work out your turnover "early". However:

• anyone registered for VAT has already established their turnover for 2020/21
• any other business that uses any sort of accounting software will know what their 2020/21 turnover is straight after the year end
• any small business that does not use accounting software is unlikely to present a major challenge in working out 2020/21 turnover
• from 6 April 2023, anyone with a turnover over £10,000 will have to use accounting software under ITSA MTD.

I don't think there is an assumption that turnover directly varies with profit. The existence of fixed costs makes that incorrect. They just decided to use it as an indicator of whether the business was smaller. Personally I see no logic in it at all. Why should someone whose turnover fell by 29% be so much worse off than someone whose turnover fell by 30%?

To be eligible for the grant you have to be able to judge whether your trading profit in 2021/22 will be significantly reduced due to the impact of coronavirus in the period May 2021 to September 2021. That is a much more challenging task!

middlingditch

I (still) don't understand the logic of any of it. The MSE guide here reports the official guidance as saying you can claim if you are still affected or "newly affected" by the pandemic. Yet if you are newly affected, your Apr 2020- Apr 2021 figures won't show any reduction at all over previous years, will they?

DjangoUnchained

i forsee a lot of very creative accounting to adjust the turnover figures to suit

Car1980

Jeremy535897 said:

Doing your 2020/21 accounts "early" is not actually the requirement. You have to work out your turnover "early". However:

• anyone registered for VAT has already established their turnover for 2020/21
• any other business that uses any sort of accounting software will know what their 2020/21 turnover is straight after the year end
• any small business that does not use accounting software is unlikely to present a major challenge in working out 2020/21 turnover
• from 6 April 2023, anyone with a turnover over £10,000 will have to use accounting software under ITSA MTD.

I don't think there is an assumption that turnover directly varies with profit. The existence of fixed costs makes that incorrect. They just decided to use it as an indicator of whether the business was smaller. Personally I see no logic in it at all. Why should someone whose turnover fell by 29% be so much worse off than someone whose turnover fell by 30%?

To be eligible for the grant you have to be able to judge whether your trading profit in 2021/22 will be significantly reduced due to the impact of coronavirus in the period May 2021 to September 2021. That is a much more challenging task!

Which is why I said "most" of your accounts. For me that is totting up a year's invoices. But then I'd be stupid
not to do cost of sales while I'm there, because I don't want to be submitting figures on the wrong side of the threshold do I? :-)
 And then I have to do the same for the wife's business.

Jeremy535897

Car1980 said:

Jeremy535897 said:

Doing your 2020/21 accounts "early" is not actually the requirement. You have to work out your turnover "early". However:

• anyone registered for VAT has already established their turnover for 2020/21
• any other business that uses any sort of accounting software will know what their 2020/21 turnover is straight after the year end
• any small business that does not use accounting software is unlikely to present a major challenge in working out 2020/21 turnover
• from 6 April 2023, anyone with a turnover over £10,000 will have to use accounting software under ITSA MTD.

I don't think there is an assumption that turnover directly varies with profit. The existence of fixed costs makes that incorrect. They just decided to use it as an indicator of whether the business was smaller. Personally I see no logic in it at all. Why should someone whose turnover fell by 29% be so much worse off than someone whose turnover fell by 30%?

To be eligible for the grant you have to be able to judge whether your trading profit in 2021/22 will be significantly reduced due to the impact of coronavirus in the period May 2021 to September 2021. That is a much more challenging task!

Which is why I said "most" of your accounts. For me that is totting up a year's invoices. But then I'd be stupid
not to do cost of sales while I'm there, because I don't want to be submitting figures on the wrong side of the threshold do I? :-)
 And then I have to do the same for the wife's business.

Remember that you are doing something straightforward, which you are going to have to do anyway, perhaps a little earlier than you would have done, to get a grant. It seems a little churlish to object.

maxmycardagain

are you taking less?
yes

how much less
70%

sorted

WendyKustom

I understand calculating the drop in turnover for 20/21 vs 19/20.  Done that and I was down almost 50%. This calculates what I would get, right? 

But the May-Sept 2021 reduction to calculate initial eligibility - reduction compared to what? 

Jeremy535897

The test is that you expect coronavirus to cause a significant reduction, in the period May 2021 to September 2021, in your expected trading profits for the year in which that period falls (year to 31 March 2022 for the majority of people).

WendyKustom

A drop compared to what though? 

Jeremy535897

WendyKustom said:

A drop compared to what though? 

Taking a year end of 31 March 2022 as the most likely situation, you compare:

• the trading profits, ignoring grants (there wouldn't have been any), you would have expected to make in the year to 31 March 2022 if there was no coronavirus, with
• the trading profits, ignoring grants, you actually expect to make in the year to 31 March 2022.

If the second is significantly reduced from the first, and that significant drop is due to the effect of coronavirus on your business in the period May 2021 to September 2021, you meet the test. So people will assess how much they expect their business to be damaged by coronavirus in the period May 2021 to September 2021, and then decide if that is significant in the context of the current year's trading profits. A nightclub, for example, can easily show that it will make no profit in the period 1 May 2021 to 19 July 2021, as it couldn't open, and as that is 2.5 months of the year, that is likely to be significant. For other businesses, it will be more nuanced.