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Accuracy of SEISS calculations

HMRC must be right

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Assuming that a trader carried on his trade throughout the years 2016/17 to 2019/19, I thought the grant would be based on the average of the three years' profits. I have seen a case where the grant was based solely on the 2018/19 profit, and I wondered if I am missing something. Surely it can't be that HMRC has made a mistake, because it must have been produced by the computer, not input manually, so one error would imply thousands of errors

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By More Tea Vicar
13th May 2020 12:46

Just had a client phone - has been trading five years or so, 2018/19 had lower profits than 2016/17 and 2017/18. Claim has been based on 2018/19 figures only. £2900 grant but should be £4279

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By SJRUK
13th May 2020 12:55

What does the calculator linked above say?
Just interested, as the legislation says its based on the average profits of the three tax years and that calculator seems to agree.
It also says my client is eligible for a grant of £6404 which I agree with but which HMRC say he's not eligible.

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By More Tea Vicar
13th May 2020 13:02

Just checked the calculator - £4280. Must be a glitch in the HMRC system, have advised client not to claim immediately and look again later today. Presumably he can claim another day - today's not his only opportunity?

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By SJRUK
13th May 2020 14:53

I'm not sure.
AccountingWeb seminar earlier on today said to claim anyway and argue about the figures later on. Perhaps someone else has any thoughts on this.

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By legerman
13th May 2020 15:06

More Tea Vicar wrote:

Just had a client phone - has been trading five years or so, 2018/19 had lower profits than 2016/17 and 2017/18. Claim has been based on 2018/19 figures only. £2900 grant but should be £4279

Oh, that's going to be interesting. One client's profits are 17/18 14k and 18/19 £41k, which I averaged out at £5500 approx. If they just base it on 18/19 he'll cop for £7500. I'll let you know how he gets on (can't claim til tomorrow afternoon)

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By Southwestbeancounter
13th May 2020 15:37

More Tea Vicar wrote:

Just had a client phone - has been trading five years or so, 2018/19 had lower profits than 2016/17 and 2017/18. Claim has been based on 2018/19 figures only. £2900 grant but should be £4279


Has the client 'screen-grabbed' the calculation to show you as we found one of ours a bit different than what we'd anticipated and realised that it was a carried forward loss relief claim making the difference.
Also one of the screens that a client has sent us stipulates that you should still make your claim, even if you think it is incorrect, so that you at least get something at this stage and appeal afterwards rather than losing out now.
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By More Tea Vicar
13th May 2020 16:09

Yes he has, no losses or other income to confuse the issue - he will be processing the claim today but delaying until later in case this glitch has been fixed in the meantime.

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By Southwestbeancounter
13th May 2020 16:23

Very peculiar, especially as I would have thought if 'one' had been computed like that they all would be as it is supposedly an automated calculation.

Please update us if you get any answers as no doubt more of us will get these issues

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By More Tea Vicar
13th May 2020 16:46

Will do.
Actually, one thought occurs... he has been late with his returns the last 3 years - this year he was submitted mid April but previous years were in May. I know 23rd April was important for the 2018/19 year, perhaps as the previous returns were submitted in May (May19 for 2017/18 and May18 for 2016/17), 23rd April cut off point has been applied to the previous years and omitted them from the calculation on that basis. A gap in the programming? Clutching at straws a bit

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By Jo Nokes
13th May 2020 16:11

To follow up on my original post, the client's calculation supplied by HMRC showed £20,000 for 2018/19, nil for 2017/18, and £14,000 for 2016/17, and the bottom line said average amount £20,000. The grant was then based on that. His income for 2017/18 was £15,000. The client made the claim, but I'm not clear if the money has been paid, or will be paid, or whether the client needs to do any more

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By Southwestbeancounter
13th May 2020 16:21

Very strange isn't it?
Like others have said if it is an automated calculation then why are others not like this?

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By fawltybasil2575
13th May 2020 17:08

@ Jo Nokes (OP).

Firstly, I assume that your words (in your 16.11 post) “income for 2017/18 was £15,000” mean that the self-employment income (as opposed to any other income source) for 2017/18 was £15,000, and that such income was correctly shown on the 2017/18 Tax Return.

If so, then quite simply HMRC has, when preparing the SEISS calculation (and whilst I cannot readily understand their doing so) OMITTED to input the 2017/18 self-employment income [or possibly even omitted to input ALL the information on that Tax Return (if their records fail to show receipt of that Tax Return)].

The key therefore is that SEISS calculation figures are required to be input for a CONTINUOUS self-employment. In the (albeit inaccurate) eyes of HMRC, therefore, since the self-employment was not CONTINUOUS, they will have “correctly” input only the 2018/19 self-employment profit figure, hence their equally “correctly” calculating the SEISS claim on that year’s figure alone.

Your client is of course obliged to notify HMRC of the over-calculation (a formal letter from yourself to that effect is all that is required, as one should follow the guidance to make the claim, and to then notify them later of their error).

Basil.

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Replying to fawltybasil2575:
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By Jo Nokes
13th May 2020 18:06

Well spotted, Basil. That thought, that the trade did not appear to be continuous, had not occurred to me. Now you've pointed it out, it's obvious. However, the trade in fact was continuous, but in the relevant year, the profit was less than 50% of the total income, by virtue of a large life insurance gain. I thought that as long as the profit in 2018/19 was over 50% of the total income, that secured eligibility, and the average of the three years would then be used. It appears that because 2017/18 year failed the test, only the 2018/19 profit is used for the grant calculations.

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By fawltybasil2575
14th May 2020 04:32

@ Jo Nokes (your 18.06 post).

YOU are CORRECT in your interpretation, and the one-off chargeable event in 2017/18 SHOULD NOT have affected HMRC’s calculations.

However, it seems too much of a coincidence that HMRC have clearly (in doing their SEISS calculations) disregarded the 2017/18 taxable profits, and I would be 85% sure that their disregarding those 2017/18 taxable profits occurred as a result of the chargeable event being incorrectly treated when they input the 2017/18 Tax Return figures into their SEISS calculations.

[HMRC are finding errors in their calculation methodologies, and try to correct their software accordingly – this is just another of those errors].

I hope this reassures you.

Basil.
PS. The Deloittes SEISS calculator to which sally1964 provided a link in the first response post above is also wrong, as it confuses the 50% rule" with the "average profits" rule, so we must not be too critical of HMRC:)

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Replying to fawltybasil2575:
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By Jo Nokes
13th May 2020 23:17

I am reassured that I understand how the system is supposed to work, but to contemplate errors in the HMRC programming is the very opposite of reassurance!

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