SEISS 5 - Affected by covid, but turnover increased

Tragen

in 18/19 and 19/20, I chose to work less for personal reasons, but still traded at a small profit. 

in 20/21, my turnover and profit both increased significantly over the pervious 2 years, but were substantially affected by covid (I would have made a lot more sans covid, rate of pay was affected).
 
Am I right in understanding that I most likely wont be eligible for claim #5?

21/22 is shaping up to be much worse than last year too!

Jeremy535897

You get that impression from the guidance, but so long as you meet all the conditions for eligibility, you should be entitled to claim the lower level of grant even if your turnover increased.

soolin

Jeremy535897 said:

You get that impression from the guidance, but so long as you meet all the conditions for eligibility, you should be entitled to claim the lower level of grant even if your turnover increased.

It really does read as though it is entirely based on turnover though, https://www.gov.uk/guidance/work-out-your-turnover-so-you-can-claim-the-fifth-seiss-grant

However if you go on to read further down the page it goes on to say- 

How your turnover affects your grant amount

When you make your claim, the online service will ask you for your turnover figures and compare them for you. The claims service will then tell you if you can claim the higher or lower grant amount.

If your turnover is down by 30% or more

Your grant will be:

• worked out at 80% of 3 months’ average trading profits
• capped at £7,500

If your turnover is down by less than 30%

Your grant will be:

• worked out at 30% of 3 months’ average trading profits
• capped at £2,850

__

However, it doesn't cover what happens if turnover is higher than previous years and it is unclear whether there can be a claim. Based on the way the calculation is done, if your 20/21 turnover is higher than in previous qualifying years then the calculation won't show a fall and leaves nothing to be calculated for the amount of the grant. My understanding as a non expert would be that there is no grant payable if turnover has increased, but I suggest you phone the HMRC Seiss helpline to get an accurate answer. 

Jeremy535897

soolin said:

Jeremy535897 said:

You get that impression from the guidance, but so long as you meet all the conditions for eligibility, you should be entitled to claim the lower level of grant even if your turnover increased.

It really does read as though it is entirely based on turnover though, https://www.gov.uk/guidance/work-out-your-turnover-so-you-can-claim-the-fifth-seiss-grant

However if you go on to read further down the page it goes on to say- 

How your turnover affects your grant amount

When you make your claim, the online service will ask you for your turnover figures and compare them for you. The claims service will then tell you if you can claim the higher or lower grant amount.

If your turnover is down by 30% or more

Your grant will be:

• worked out at 80% of 3 months’ average trading profits
• capped at £7,500

If your turnover is down by less than 30%

Your grant will be:

• worked out at 30% of 3 months’ average trading profits
• capped at £2,850

__

However, it doesn't cover what happens if turnover is higher than previous years and it is unclear whether there can be a claim. Based on the way the calculation is done, if your 20/21 turnover is higher than in previous qualifying years then the calculation won't show a fall and leaves nothing to be calculated for the amount of the grant. My understanding as a non expert would be that there is no grant payable if turnover has increased, but I suggest you phone the HMRC Seiss helpline to get an accurate answer. 

As my original post pointed out, you need to read the Treasury Direction, which is the law, and prevails over the guidance you quote. It says:

"5.1 Where one of the conditions in paragraph 5.3 is met, the amount of the SEISS 5 payment is the lower of-
(a) £7,500, and
(b) 3 × ( 𝑇𝑃 12 × 80%).
5.2 In any other case, the amount of the SEISS 5 payment is the lower of-
(a) £2,850, and
(b) 3 × ( 𝑇𝑃 12 × 30%).
5.3 The conditions for the purposes of paragraph 5.1 are-
(a) the person carried on a trade in the tax year 2019-20 but did not carry on a trade in any of the tax years 2016-17, 2017-18 or 2018-19,
(b) any trading profits for the tax years 2018-19 and 2019-20 arises solely from the person’s underwriting business, or
(c) the person meets the financial impact declaration test. [That means the FID only determines the rate of grant.]
5.4 For the purposes of this paragraph, TP is determined in accordance with paragraph 8.2 of SEISS 4.
5.5 In paragraph 5.3(b), “underwriting business” has the meaning given in section 184(1) of the Finance Act 1993.
Financial Impact Declaration Test
6.1 The financial impact declaration test (the “FID test”) is met if the turnover of the trade in the pandemic period is at least 30% less than the turnover of the trade in the reference period."

I would also point out that while 10% is less than 30%, so is -10%.

soolin

This is where I get confused- it states somewhere in there 'The level of the fifth grant depends on how much your turnover has been reduced' and I can't see any reference to the grant if the turnover has increased. Also if you do the calculation the figures don't work if 20/21 is higher than the previous qualifying period .

However, I am happy to be proved entirely wrong , as I often am, and hope that the OP is eligible

Jeremy535897

soolin said:

This is where I get confused- it states somewhere in there 'The level of the fifth grant depends on how much your turnover has been reduced' and I can't see any reference to the grant if the turnover has increased. Also if you do the calculation the figures don't work if 20/21 is higher than the previous qualifying period .

However, I am happy to be proved entirely wrong , as I often am, and hope that the OP is eligible

As I said, it is the guidance that uses that wording. The law, which is all that matters, simply says that (assuming you meet all the other conditions) you get 80% if:

• your turnover in 2020/21 fell by 30% or more compared with 2019/20 (or possibly 2018/19); or
• you started trading in 2019/20; or
• you are an underwriter and have no other trade.

If you meet none of these conditions, but meet all the other conditions, you get 30%, even if your turnover is ten times what it was in 2018/19 or 2019/20.

Grumpy_chap

This is very confusing in the way it is written and I can certainly see that there will be a court case somewhere to establish as it is quite likely that staff within the HMRC will also see confusion and possibly different officers at HMRC will apply this differently.

Soolin quotes the guidance:

• "If your turnover is down by 30% or more..."
• "If your turnover is down by less than 30%..."

So, a lay person would reasonably interpret that as "if your turnover is up..." you fail both tests on the first part of the sentence.

Using the grammar, there is no conjunction so the sentence is to be read as a whole in each case.  It is not "if your turnover is down" and by either "30% or more" or "by less than 30%".

As Jeremy points out, turnover "up by 10%" is also turnover "down by -10%" and -10% is less than 30%.

Jeremy then quotes the Treasury Direction which is applying the tests "If your turnover is down by 30% or more..." and "in any other case..."  There is not actually a tests "If your turnover is down by less than 30%..." in the extracts of the Treasury Direction that Jeremy has provided.

Based upon the evidence set out in this thread, the situation does seem to be that turnover down by 30% or more means the larger grant and everyone else can claim the smaller grant.  
That seems entirely at odds with what the clear intent of what it can be assumed the Government / Parliament intended.  The law is not determined by the intent of Parliament, but by the statute as enacted.  I wonder whether there might be another paragraph elsewhere in the full legal documents that make it clear that turnover "not down" does not qualify for any 5th SEISS.

The extreme case of Jeremy's interpretation would be that local woven face mask co., previously barely surviving, but now in the millionaire club can now claim the 5th SEISS in addition (at the lower rate).  That is illogical.

Pennywise

Grumpy_chap said:

The extreme case of Jeremy's interpretation would be that local woven face mask co., previously barely surviving, but now in the millionaire club can now claim the 5th SEISS in addition (at the lower rate).  That is illogical.

But they still have to have been adversely affected by Covid for the qualifying period of the 5th grant, i.e. "reasonably believe there will be a significant reduction in your trading profits due to the impact of COVID-19 between 1 May 2021 and 30 September 2021".  The turnover test only determines whether you get the full grant or the reduced amount.  You still need to pass the profit test to qualify at all.  So a business doing particularly well at the moment wouldn't qualify.

Jeremy535897

Pennywise said:

Grumpy_chap said:

The extreme case of Jeremy's interpretation would be that local woven face mask co., previously barely surviving, but now in the millionaire club can now claim the 5th SEISS in addition (at the lower rate).  That is illogical.

But they still have to have been adversely affected by Covid for the qualifying period of the 5th grant, i.e. "reasonably believe there will be a significant reduction in your trading profits due to the impact of COVID-19 between 1 May 2021 and 30 September 2021".  The turnover test only determines whether you get the full grant or the reduced amount.  You still need to pass the profit test to qualify at all.  So a business doing particularly well at the moment wouldn't qualify.

Yes, as I said, you have to meet all the eligibility conditions to claim the grant. There is nothing else I can see in the Treasury Direction, but feel free to peruse it:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/999465/SEISS_5_Direction_signed.pdf

There is a lot more on the complexity regarding turnover where partnerships, with or without other trades, are involved.

Grumpy_chap

Pennywise said:

Grumpy_chap said:

The extreme case of Jeremy's interpretation would be that local woven face mask co., previously barely surviving, but now in the millionaire club can now claim the 5th SEISS in addition (at the lower rate).  That is illogical.

But they still have to have been adversely affected by Covid for the qualifying period of the 5th grant, i.e. "reasonably believe there will be a significant reduction in your trading profits due to the impact of COVID-19 between 1 May 2021 and 30 September 2021".  The turnover test only determines whether you get the full grant or the reduced amount.  You still need to pass the profit test to qualify at all.  So a business doing particularly well at the moment wouldn't qualify.

Thanks - that makes sense.  

I suppose it is possible that the company making woven face masks also likely made other woven products which may have been impacted by COVID, but the overall effect is no impact to trading profits (or indeed an increase).  Could they still apply the "but for COVID" test to say the profits would have been higher as they expected to sell more general woven things and also expected to sell many face masks? 

This part you have quoted links back to previous very long and detailed threads about what is a "significant reduction" and "impact of COVID".  In those threads, it was discussed that the impact can be comparative to this period with COVID versus this period without COVID, rather than compared to previous years.

The overall assessment could possible now look like this:

1. Are profits down this year because of COVID (this year versus what this year would have been without COVID)?
2. Is turnover down by more than 30%?
3. All other cases...

So, local woven face mask co falls as (1).

I can see that there will be some challenges if claims are made yet profits are up compared to previous years, even though the "but for COVID" test seems to apply?  It is also rather inconsistent to use profits in the first test and then turnover in the second test.

Jeremy535897

Remember that you have to ignore grants for the turnover and trading profit tests. One of the early criticisms of SEISS was that you could have a very moderate impact on the business from coronavirus (buying a bit of PPE for example), but still claim the grant. The significant reduction of trading profit tests were designed to require a bit more negative impact on the business, and while no doubt there will be circumstances where claims are made on the basis that profits would have improved significantly more without coronavirus, I suspect they will be quite rare.

Remember also that the turnover "test" is in addition to, not instead of, the significant reduction in trading profits test. I confess I don't see any point in it, unless it is designed to make the grants for businesses set up in 2019/20 look more generous (as first year profits tend to be low, the grant is commensurately low, but at least they get the 80% grant).