SEISS harsh

MattMattMattUK

tlbarrett said:

Sorry for the late reply. It turns out my accountant had told them I had ceased trading even though I hadn't. They then went on to complete a SA return showing £12400 but the money had gone into another account even though it was self employment income.

When I tackled them today they literally threw their hands up and said any responsibility for applying for the grant was mine not theirs. They just sort the accounts out. I said to them it was because they had said I had ceased trading that was the cause of the problem but they said they had done it to maximise my tax saving and again the SEISS was nothing to do with them

I think you need some greater clarity as to what they have actually done, exactly what was filed as self assessment, when they informed HMRC you had ceased training and when they informed HMRC you started trading again, and also what accounts were filed for the Ltd, with PAYE and corporation tax payments on top. You will need to get them to send you copies of your personal tax returns, company accounts, payroll, corporation tax paid etc. so you can work through these methodically.

Grumpy_chap

This does seem harsh, and the circumstances are certainly unfortunate.

Ultimately, with the previous tax returns, the Accountant can assist in their preparation, but the ultimate responsibility for the accuracy remains with the individual.

The fact seems to be that the declared return for 2018/19 stated that the OP had ceased trading sole-trader.  That appears to be supported by the invoices being processed through the OP's Ltd Co in 2019/20.  Then, in 2020/21, the OP chose to recommence work in sole-trader mode.  Both the SA return plus the actual fact of trading through the Ltd Co. seem to support the HMRC view that the OP ceased sole-trader self employment at the end of 2018/19.  Obviously, when this was done, no-one would have foreseen the coming global pandemic.

It is hard to see that anyone actually did anything wrong (OP or Accountant), but may have acted differently with hindsight.  It is also hard to see how the HMRC have done anything other than act in accordance with the rules in requesting the SEISS grants are repaid.  HMRC can only go on the basis of the facts as they had presented.  This is all very harsh, but seems correct.

Did the OP claim any furlough with respect to the income drawn from the Ltd Co?

Has the OP claimed UC?  That may be the only other remaining option.

Pennywise

justwhat said:

Maybe its just me ....but covid /covid grants have shown some of these accountants to be less than competent/efficient.

When i had an accountant he offered advice and guidance. Some seem to just do admin lol 
 

Accountancy has already been very varied, mostly because it's not a protected/regulated profession.  Literally anyone can call themselves an accountant and set up an accountancy practice.  Other professions are far better regulated, i.e. you can't call yourself a solicitor, doctor, architect, surveyor, without actually being qualified/regulated by their respective professional bodies. So it's possible the "accountant" was little more than a book-keeper.  Having said that.......

Another factor is that there have been conflicting demands.  Back in mid 2020 when I was preparing accounts/tax returns for the year end 5/4/20, we were having a lot of talks with clients about changing year end dates, conversion between sole traders/limited companies, putting directors on payroll in case of future furlough, etc.  There were so many conflicting factors, it was impossible to know what was the "right thing" to do, so we, along with the clients, were often doing "best guess" both of how Covid panned out and what, if any, future covid support packages would look like.

We delayed the submission of lots of tax returns "just in case" things changed and we wanted to do some final "tweaking" such as changing a year end date, etc.  But, we were also under pressure to submit tax returns as early as possible "Just in case" there was a change to the support schemes (particularly re the 3 million excluded), that would increase their support grants.

You also have to remember that late Summer 2020, lots of people thought "it was all over".  The furlough scheme was being wound down, we had Eat out to help out, workers were told to go back to work, covid infections were low, etc.  I know a lot of decisions (both clients and accountants) were made on the assumption that covid was over as that's how things looked at that time.

I think it's easy to look back and complain with the benefit of hindsight, but you need to look back and consider what was known/expected at that time.  Obviously, if the accountant in this case did indeed make a foul up, i.e. included a cessation date when they knew it hadn't ceased, they're clearly at fault, but considering the OP was confused themselves, i.e. paying money into a different business bank account, it's entirely reasonable to think the accountant was likewise confused - suddenly starting to pay money into a company bank account and not a sole trader account would indeed give the impression that the sole trader business had ceased.  So it's not as cut and dried as it may sound.  A lot of clients are very bad at giving their accountants the proper information.  We just don't know the circumstances in this case at all. 

If the OP feels aggrieved then they need to refer to the letter of engagement/terms of business, and consider a claim against the accountant's professional indemnity insurance if there is enough evidence that the accountant had a duty of care/responsibility for covid support matters and failed in that duty of care.

Jeremy535897

tlbarrett said:

Sorry for the late reply. It turns out my accountant had told them I had ceased trading even though I hadn't. They then went on to complete a SA return showing £12400 but the money had gone into another account even though it was self employment income.

When I tackled them today they literally threw their hands up and said any responsibility for applying for the grant was mine not theirs. They just sort the accounts out. I said to them it was because they had said I had ceased trading that was the cause of the problem but they said they had done it to maximise my tax saving and again the SEISS was nothing to do with them

ie.. they have thrown me under the bus !

Where the money went is irrelevant. You say your accountant told HMRC you had ceased self employment. When and how did they do this? In any event, the submission of a SA return showing self employment income should negate any prior notification of cessation.

Was the return filed by midnight on 2 March 2021? Did you approve it, as you are required to do?

If your accountant filed a SA return by 2 March 2021 for 2019/20 showing self employment profits, HMRC should accept this. The Treasury Direction for SEISS 5 says:

"7.1 For the purposes of SEISS 5, paragraph 10 of SEISS does not apply and amounts of trading profits and relevant income are determined by reference to a person’s tax returns for any relevant tax years as at 2 March 2021. 

7.2 Subject to paragraph 8 below, no account will be taken of any amendment made to a tax return for a relevant tax year on or after 3 March 2021 or any contract settlement."

HMRC could argue that this applies only to quantum rather than evidence of trading itself, but it is a weak argument.

Whether you have ceased to trade is a question of fact, although there is some flexibility, but it is not something your accountant can choose to say to HMRC "to maximise a tax saving" if the facts don't support it. Surely they discussed it with you?

MattMattMattUK

Jeremy535897 said:

Whether you have ceased to trade is a question of fact, although there is some flexibility, but it is not something your accountant can choose to say to HMRC "to maximise a tax saving" if the facts don't support it. Surely they discussed it with you?

I would presume that the accountant would be advising the tax efficiency of Ltd with low PAYE and dividend. It seems even more odd someone who was the sole business owner would operate both in parallel. 

Jeremy535897

MattMattMattUK said:

Jeremy535897 said:

Whether you have ceased to trade is a question of fact, although there is some flexibility, but it is not something your accountant can choose to say to HMRC "to maximise a tax saving" if the facts don't support it. Surely they discussed it with you?

I would presume that the accountant would be advising the tax efficiency of Ltd with low PAYE and dividend. It seems even more odd someone who was the sole business owner would operate both in parallel. 

That advice's timing would be somewhat questionable, given that by 31 March 2020 we knew the conditions for SEISS, and the problems over CJRS and sole company directors. Sometimes a business starts as a sole trade, and then some customers want to trade with a limited company. Rather than put the sole trade into the company, a company is used for the customers who want it. It's all speculation at this point.

Car1980

Gather all your evidence and appoint a new accountant. They'll be able to rectify the situation, don't panic.

MattMattMattUK

Jeremy535897 said:

MattMattMattUK said:

Jeremy535897 said:

Whether you have ceased to trade is a question of fact, although there is some flexibility, but it is not something your accountant can choose to say to HMRC "to maximise a tax saving" if the facts don't support it. Surely they discussed it with you?

I would presume that the accountant would be advising the tax efficiency of Ltd with low PAYE and dividend. It seems even more odd someone who was the sole business owner would operate both in parallel. 

That advice's timing would be somewhat questionable, given that by 31 March 2020 we knew the conditions for SEISS, and the problems over CJRS and sole company directors. Sometimes a business starts as a sole trade, and then some customers want to trade with a limited company. Rather than put the sole trade into the company, a company is used for the customers who want it. It's all speculation at this point.

I agree the timings for that advice at the current point would not have seemed sensible. I meant more in general, if one is the sole shareholder of an Ltd it would seem to make little sense to run the Ltd in parallel with self-employment, to me it would have not made sense to get into that position in the first place.

MattMattMattUK

Car1980 said:

Gather all your evidence and appoint a new accountant.

I totally agree with that part.

Car1980 said:
They'll be able to rectify the situation

I am not sure on that part as HMRC will not accept amended returns etc. in relation to SEISS, only documentation submitted before the deadlines can be taken into account.

Car1980 said:

don't panic.

I also totally agree with that part, regardless of the outcome of the process with HMRC there is always a way to resolve the connected issues longer term.

Pennywise

Jeremy535897 said:

MattMattMattUK said:

Jeremy535897 said:

Whether you have ceased to trade is a question of fact, although there is some flexibility, but it is not something your accountant can choose to say to HMRC "to maximise a tax saving" if the facts don't support it. Surely they discussed it with you?

I would presume that the accountant would be advising the tax efficiency of Ltd with low PAYE and dividend. It seems even more odd someone who was the sole business owner would operate both in parallel. 

That advice's timing would be somewhat questionable, given that by 31 March 2020 we knew the conditions for SEISS, and the problems over CJRS and sole company directors. Sometimes a business starts as a sole trade, and then some customers want to trade with a limited company. Rather than put the sole trade into the company, a company is used for the customers who want it. It's all speculation at this point.

We did indeed, but there were suggestions that the support schemes would be reviewed to help the excluded, and in fact, there was a change to provide support for those on maternity leave who'd been excluded under the initial rules.  The fact that the rules never really changed to bring in more "excluded" is a matter of hindsight.

As for the conversion to a limited company, we certainly did one around that time, for someone who was excluded from SEISS due to the 50:50 rule.  The client took a gamble on more likelihood of getting furlough than SEISS, so a company was formed, trade transferred and he was put on the payroll.  As luck would have it, he became eligible for furlough in the Autumn lockdown/furlough rule change (i.e. employees on payroll as at 31 October), so it worked out well for him, but obviously could have been different had the furlough qualifying date not changed but SEISS extended to include more previously excluded.  (Obviously covid support wasn't the main factor, there were other reasons to convert, but Covid support was certainly extensively discussed).

Hindsight is a wonderful thing.