Tag: SEISS

DMS Posts

Ready for a SEISS challenge: Penalties and claims

Debonair Management Services Limted

The Treasury has provided HMRC with substantial resources to recover wrongly claimed coronavirus support payments, expecting to recoup over a third of grants made.

HMRC has confirmed that it will involve agents when looking into clients’ SEISS claims, despite side-lining them when clients needed to claim SEISS.

Proving SEISS was validly claimed

Entitlement conditions have evolved with SEISS varying the evidential boxes to be ticked.

Conditions which must be metSEISS 1SEISS 2SEISS 3SEISS 4
The qualifying periodUp to 13 July 2020From 14 July to 19 Oct 20201 Nov 2020 to 29 Jan 20211 Feb to 30 April 2021
Intention to continue to trade in the tax year 2021/2022 (SEISS 4) and 2020/2021 (SEISS 1-3)YESYESYESYES
Business has been adversely affected by coronavirusYESYESYESYES
Reduced activity, capacity or demand or temporarily unable to trade in qualifying period, compared with what could reasonably have been expected but for the adverse effect of coronavirusn/an/aSales reduced in qualifying periodSales reduced in qualifying period
Reasonable belief that the business will suffer a significant reduction in trading profits in a basis period in which the qualifying period falls because of reduced activity, capacity or demand due to coronavirus.n/an/a Significant reduction in trading profits over at least one whole basis periodSignificant reduction in trading profits over at least one whole basis period

What is meant by… ?

Business adversely affected

This includes being unable to work because shielding, self-isolating, on sick leave or having care responsibilities because of coronavirus.

It also includes scaling down or temporarily stopping trading due to interrupted supply chains, fewer or no customers, staff unable to work or one or more contracts have been cancelled and the business tried to replace the lost work.

Isolation or caring responsibilities due to arrival in the UK are not valid adverse circumstances for SEISS, increasing the jeopardy of overseas travel this year.

Basis period in which the qualifying period falls

The qualifying period for SEISS 4 is 1 February to 30 April 2021 (and for SEISS 3 it was 1 November 2020 to 29 January 2021), but the basis period which must have a ‘significant reduction’ in trading profits depends what date accounts are made up to.

For many, the qualifying period may fall into two separate accounting years and, at the time of claiming, there must be a reasonable, honest belief that profits for at least one of those will suffer a significant reduction because of coronavirus. The significant reduction in profits must be for the basis period as a whole, not just the qualifying period, and it must be due to reduced sales – increased costs are not relevant for SEISS 3 and 4 claims.

Significant reduction

The Treasury and HMRC have declined to give any definition of “significant”, except to comment that it must be an honest assessment. It seems that a 30% reduction is definitely significant (based on the future SEISS 5 structure), but it may be argued that a smaller reduction is significant too, particularly if the claimant has no other source of income.

The percentage reduction is by comparison with what ‘would otherwise have reasonably been expected’, ie what profits were or could have been forecast to be if it were not for the pandemic.

Penalties and repayment of SEISS

HMRC has powers to assess overpaid SEISS even before 2020/21 tax returns are submitted, but otherwise SEISS wrongly claimed must be included on tax returns.

If a claimant didn’t know they were not entitled when the grant was received there will be no penalty, provided the grant has been repaid by 31 January 2022. At the other end of the scale, failure of a claimant to notify HMRC of a grant they knew they were not entitled to when received will be treated as deliberate and concealed for penalty purposes.

HMRC has a web page for anyone needing or choosing voluntarily to repay some or all of a SEISS claim.

DMS Posts, Tax

SEISS 4

Debonair Management Services Limted

Almost five months after the last round of the Self-Employment Income Support Scheme (SEISS), HMRC is now sending emails, letters or messages within its online service advising those whose tax returns show they may be entitled to claim the fourth SEISS grant when their April when their personal claims window opens.

The window will open in “late April” according to HMRC and will close for all SEISS 4 claims on 1 June 2021.

SEISS has evolved

Coronavirus isn’t alone in having spawned variants. The newest SEISS variant, SEISS 4, covers the period from 1 February 2021 to 30 April 2021 and brings 2019/20 tax returns into account, both for eligibility and in calculation of the amount of the grant. This will open the scheme to some new applicants who started up in 2019/20; it excludes not only those who are no longer trading but also some who had little or no profit relative to other income in 2019/20.

Eligibility is determined by HMRC and only applies to those whose 2019/20 tax returns were submitted before 3 March 2021.

HMRC will test eligibility for 2019/20 in isolation to see if profits are under £50,000 and at least half the relevant income. For those who don’t qualify based on 2019/20 alone, HMRC will then evaluate the four tax years 2016/17, 2017/18, 2018/19 and 2019/20 combined to test if average profits across the four years are under £50,000 and at least half of relevant income.

If trading hasn’t continued through all four tax years, only the most recent continuous two or three tax years with trading income are used in determining both eligibility and amount.

Amount is also determined by HMRC, and SEISS 4 will again be 80% of three months’ average profits, but it is likely to be different to SEISS 3. The amount of SEISS 4 could be higher or lower than SEISS 3 because 2019/20 profits will be included for the first time in working out average profits.

There is no mechanism to claim a smaller amount – the only option would be to make the claim and voluntarily repay part of it.

Entitlement

Just because HMRC’s historical records may show eligibility does not mean that someone is necessarily entitled to claim. There are two important declarations required:

  1. Traded as self-employed in 2020/2021 and intending to continue to trade in 2021/2022
  2. Must have reasonable belief there will be a significant reduction in trading profits due to reduced self-employed income (not just increased costs) because of reduced business activity, capacity, demand or inability to trade due to coronavirus. There are several key terms in this declaration which will be discussed in more detail in a follow-on article next week.

Having a new child affected the 2019/20 tax year?

It may be possible in some limited circumstances for someone to make a claim even if having a new child means they do not meet the eligibility tests based on their 2019/20 tax return. They must have submitted a 2018/19 tax return and meet all other eligibility and entitlement criteria. HMRC advises: “Before making a claim, you must contact us to verify that having a new child has affected your eligibility.”

For these purposes “having a new child” includes being pregnant, giving birth (including a stillbirth after more than 24 weeks of pregnancy) and relates to the six months after giving birth, and caring for a child within 12 months of birth or adoption placement for a claimant who has parental responsibility.

Tax on SEISS payments

All SEISS variants are taxable and class 4 NICable and for SEISS 4 this will be in 2021/22, the year in which the grant is made, even though most of the qualifying three months are not in 2021/22.

SEISS grants received must be declared on self-assessment returns separately from normal business turnover.

Be prepared for HMRC checks

HMRC has repeatedly said all SEISS claims will be checked. The focus of checks will principally be the entitlement declarations claimants make, since HMRC itself is determining eligibility and amount. HMRC can be expected to automate checks to some extent by comparing SEISS claims with turnover and profits on self-assessment tax returns for 2020/21 and eventually with 2021/22 tax returns.

DMS Posts, Tax

CJRS and SEISS: how to correct an over claimed grant

Debonair Management Services Limted

Unsurprisingly, HMRC has announced how they will be cracking down on fraudulent grant claims. Due to the speed and urgency that claims were made and issued, there are likely to be a number of innocently miscalculated grants and HMRC is requesting that businesses double-check their calculations and notify HMRC within 90 days of receiving any grants, however the penalties will largely be directed at those who deliberately did not comply with the criteria and knowingly submitted fraudulent claims.

HMRC services sign in

This applies to the Coronavirus Job Retention Scheme (CJRS) and the Self Employment Income Support Scheme (SEISS) as well as the Coronavirus Statutory Sick Pay Rebate Scheme and other coronavirus business support grants. In this blog, we have explained how to repay an over claimed CJRS or SEISS grant, when you need to do this and what penalties you may face if you do not comply.

Why would I need to repay part or all of a claim?

Under the CJRS, the main reasons that could trigger a partial or full repayment of a claim include:

  •  grants not used for the purposes for which they are intended;
  •  calculation errors
  •  employees working during periods that they are on furlough.

For those who claimed under the SEISS you will need to repay some or all of your grant if you:

  • received more than HMRC said you were entitled to
  • your business was not adversely affected
  • you did not trade in the tax year 2019 to 2020
  • you did not intend to continue to trade in the tax year 2020 to 2021
  • you have incorporated your business since 5 April 2019

When do I need to inform HMRC about an overpayment?

If you have claimed too much for a grant and have not repaid it, you must notify HMRC and repay the money by the 20 Oc‌to‌be‌r 2020 if you received money you’re not entitled to or if your circumstances changed on or before 22 J‌ul‌y or within 90 days if you received the money after 22 July.

How do I tell HMRC about an over claimed grant?

CJRS: If you are making another CJRS claim, you can report the overpayment as part of the claims process, and the new claim will be adjusted to count for the overpayment. If you are not making any further claims, you will need to contact HMRC who will then provide a reference number for you to make a repayment. Further guidance can be found here.

SEISS: To repay an over claimed SEISS grant you will need to log into your Government Gateway account and fill out the relevant form with your grant claim reference and Self Assessment Unique Taxpayer Reference (UTR) number. Once you have filled this form out, HMRC will give you the details of where to repay the funds.

What penalty could I face if I do not notify HMRC?

For an over claimed CJRS payment that is not paid back within the notification period, you may have to pay a penalty of up to 100% of the amount of the CJRS grant that you were not entitled to receive or keep. HMRC has been very clear that the onus is on the taxpayer to determine if they received an incorrect grant amount.

If you received an overpayment under the SEISS, the penalty will depend on whether you knowingly over claimed or not. If you knowingly applied and received a grant whilst being ineligible, the penalty will be based on the amount you were not entitled to receive along with other factors. If you honestly believed you were eligible, and you later realised this was not the case, HMRC will only penalise you if you have not repaid the grant by 31 January 2022.