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Anyone else concerned about the new SA100 P.5 -

- "Incorrectly claimed" section ?

Didn't find your answer?

I very much doubt that any genuinely overpaid good citizens will use it to admit their error - and in any event they would be ill-advised to. If they think they are in that position, they should deal with it in advance of filing SA100.

What I fear will happen, though, is that those who were in doubt about the much-discussed inadequate and confusing wording of SEISS round 3, will now revisit their doubt, only this time with the benefit of hindsight about how their profits turned out. This may lead them to re-apply the test of their "reasonable belief" at the time of their application, only this time viewed from the later perspective and with the benefit of hindsight. 

I am concerned that this will lead people, especially if not professionaly advised, to conclude that they claimed SEISS R3 "incorrectly" when in fact they did no such thing. They may overlook the pivotal point that their reasonable belief at the time of the application was what mattered.

I think it is very unfair to include this section and some taxpayers will be unfairly penalised. I hope advisers will give very robust and precise advice to any clients who consult them about this.

 

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By SteveHa
06th Apr 2021 11:20

Well, here's the rub. The amount of SEISS received or claimed, whether correctly or incorrectly, is not tax.

A Return is issued by HMRC by virtue of TMA1970 S.8, which states right in the opening:

"(1)For the purpose of establishing the amounts in which a person is chargeable to income tax and capital gains tax for a year of assessment, [F3and the amount payable by him by way of income tax for that year,] he may be required by a notice given to him by an officer of the Board—

(a)to make and deliver to the officer F4... a return containing such information as may reasonably be required in pursuance of the notice, and

(b)to deliver with the return such accounts, statements and documents, relating to information contained in the return, as may reasonably be so required."

Since the legitimacy of an SEISS claim is not a factor in determining the tax payable (although the amount received is, but that's a different thing), then there is no basis in law for either asking the question, or creating a requirement to answer it.

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By Tax Dragon
06th Apr 2021 11:35

That's not entirely correct, Steve.

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By jonharris999
06th Apr 2021 11:45

Why not?

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By SteveHa
06th Apr 2021 11:50

I echo John's question - why not?

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By Tax Dragon
06th Apr 2021 11:55

It is a tax. At a rate of 100% (higher rates are available).

So, not only can HMRC ask the question in the SA100; in my view they have to do so.

See FA2020 Sch16 para8(5).

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By I'msorryIhaven'taclue
06th Apr 2021 12:12

Separate matter, TD, but I find FA2020 Sch16 para8(3)(b) a little disconcerting:

(3) For the purposes of this Schedule, references to a person not being entitled to an amount include, in the case of an amount of a coronavirus support payment made under the coronavirus job retention scheme, a case where the person ceases to be entitled to retain the amount after it was received...

(b) ...because the person has not, within a reasonable period, used the amount to pay the costs which it was intended to reimburse.

So who decides just which costs it was intended to reimburse?

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By Wanderer
06th Apr 2021 12:20

The employment costs to which the claim relates. (Did you miss the CJRS reference?)

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By I'msorryIhaven'taclue
06th Apr 2021 12:40

Doh! I did indeed, and read it as SEISS-related.

Thank you, Wanderer.

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By SteveHa
06th Apr 2021 13:12

Damn - I missed that completely. This basically introduces a tax on income that is not legally income, but is rather a fraudulent claim. So effectively, Sch 16 can collect the tax at 100%, whilst the door is open for recovery of the amount as a fraudulent claim elsewhere, with all of the sanctions available to the judiciary.

And who said our laws are not fair?

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By Tax Dragon
06th Apr 2021 14:28

I'm guessing (but it is a guess) that it's about enquiry and discovery powers. Pop it into the tax regime and a whole realm of such powers pre-exists.

SteveHa wrote:

And who said our laws are not fair?

Ooh, I love a quiz. Justin?

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By tonyaustin
07th Apr 2021 11:18

If not tax now, it will be when Finance (No.2) Bill is passed, assuming no amendment made to Clause 32 (3). Otherwise it is tax under existing Para 8, Schedule 16, FA 2020.

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By Tax Dragon
06th Apr 2021 14:48

Btw, where was "reasonable belief" tested in the conditions?

It's all very well preparing your WSNs now (if that's what you're up to), but you need to get them right!

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By jonharris999
06th Apr 2021 14:58

I don't follow you.

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By Tax Dragon
06th Apr 2021 15:11

Reference your OP:

jonharris999 wrote:

This may lead them to re-apply the test of their "reasonable belief" at the time of their application, only this time viewed from the later perspective and with the benefit of hindsight....They may overlook the pivotal point that their reasonable belief at the time of the application was what mattered.

"They may overlook the pivotal point that their reasonable belief at the time of the application was what mattered." Was it?

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By jonharris999
06th Apr 2021 15:44

Yes, of course. Where in the Directions or guidance did it say that the reasonable belief would be subject to a retrospective review?

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By Tax Dragon
06th Apr 2021 16:35

Only reason I asked was that someone asked about the conditions for grants 1+2 the other day and I posted links thereto. The actual rules didn't, that I remember from that day, use either of the words "reasonable" or "belief". Guidance may have done, but a lot of water has passed under TD's bridge since then and s/he's forgotten.

In any event, whenever legislation does refer to reasonable belief, that is of course subject to review (and all review is retrospective, no?) Reasonable belief requires two things: belief, and [objective] reasonableness of that belief.

To answer your actual question, I'm pretty sure that any claimant whose trade stopped because of the national response to coronavirus (and many people's trade did stop, as you know) has no need to worry about what to put in the box.

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By jonharris999
06th Apr 2021 16:34

Indeed, "reasonable belief" was a concept introduced to the Directions for Round 3. It wasn't in the first set of Directions.

The whole point is whether what is being reviewed is: a) was the belief reasonably held at the time of the application? - this is what should correctly be reviewed - or b) did subsequent events reveal the belief to be incorrect in hindsight? - grounds on which there is no basis to review it. One may be required to completely and accurately distinguish between a reasonable forecast and a correct forecast.

You seem much more confident than me that the taxpaying public and its advisors (even before we get to HMRC) understand this distinction and will be confident in finding their way through it. I doubt that.

And this difficulty comes even before we get to the difficulty of judging whether or not any 'significant' reduction in profits etc was a reduction compared to an imaginary, no-crisis outturn (the correct yardstick according to the Directions) or compared to an earlier year, or an average of previous years (not the correct yardstick).

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By Tax Dragon
06th Apr 2021 17:01

So why didn't you raise this point when the 3rd grant was announced, and the 'reasonable belief' test brought in, if you thought it was going to be problematic?

(FA2020 was already in force, so you knew the question would be asked in the SA100... although I think I do object to the way it has been asked... if that was your point?)

All that aside, what more would you have had HMRC do (or have them do now)?

"HMRC expects you to make an honest assessment about whether you reasonably believe your business will have a significant reduction in profits.

"To make a claim for the third grant your business must have had a new or continuing impact from coronavirus between 1 November 2020 and 29 January 2021, which you reasonably believe will have a significant reduction in your profits."

And "You must keep evidence to support your claim".

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By jonharris999
06th Apr 2021 17:22

I did. You obviously (and quite reasonably) have better things to do than consume my entire ouevre.

My objection is that I think this is an invitation to honest and nervous taxpayers (and their advisers who perhaps aren't thinking it through hard enough - unfair...?) to have another go at tripping over the ridiculous Round 3 conditions and repaying money they were in fact perfectly entitled to because all the various tests are so easily misunderstood.

You are quite right that this was my objection to Round 3 at the time and I risk fair accusation of repetition. I was just worried by the prominence of the new section of the SA100 when I saw it.

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By Tax Dragon
06th Apr 2021 17:34

Missed it, sorry (but I belatedly applaud you for it).

Anyway, fun chatting this time. But must be off. Cooking etc. Laters.

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By johnacarpenter
07th Apr 2021 10:39

HMRC required that tax payers claim SEISS.
This means that only the tax payer and HMRC know what was claimed.
Agents were specifically denied access to this process, so the chance of getting this wrong are greatly increased.
Presumably a method of collecting fines as well as tax.

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By Rgab1947
07th Apr 2021 10:47

The last sentence says it all. Am I a cynic?

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By johnacarpenter
07th Apr 2021 11:08

Exactly, fines are never justified by government, especially where there is no loss of revenue.

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By North East Accountant
07th Apr 2021 13:36

As far as we're concerned client dealt with his own SEISS and therefore the following question to every client will sort this?

Us - Did you incorrectly claim any SEISS?
Client - No

Nothing to enter into that box.

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By Ben Alligin
07th Apr 2021 15:36

Precisely. If you tried to assist a client with an SEISS application, the question popped up immediately from HMRC 'Are you an agent? In which case you cannot complete this application on behalf of a client' or words to that effect.

Therefore nothing to do with us Guvn'r.

HMRC cannot now demand that we police the previous applications by clients.

I commend NE Accountant's suggestion to the House.

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By Tax Dragon
08th Apr 2021 11:32

Ben Alligin wrote:

I commend NE Accountant's suggestion to the House.

Not sure it's so easy. An extreme to make the point: client's t/o (excluding grants etc) has doubled, profit quadrupled. All grants claimed.

Can you rely on:

North East Accountant wrote:

Us - Did you incorrectly claim any SEISS?
Client - No

?

Do you think maybe you have some responsibility to help the client declare the correct tax liability? Do you maybe think you should ask about the evidence that the client has kept in support of the claims?

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By jonharris999
08th Apr 2021 11:48

Doubled or quadrupled relative to what?

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By Paul Crowley
08th Apr 2021 12:07

There is the nub of the issue
Relative to what
1 and 2 so vague that all claims defendable

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By Tax Dragon
08th Apr 2021 12:31

Paul Crowley wrote:

all claims defendable

We'll see, I guess.

But it's maybe part of a discussion to have with the client? (And that's the only point I'm making... are y'all saying you will simply refuse to have that discussion with any client?)

Like everyone, we have clients that were wiped out by the lockdowns. We have others that benefitted (and said as much at the time). I would expect the former to have claimed all that was going. If any of the latter claimed, I would want to know why; if there was good reason, and a good record of the reason, we would then be better placed to explain that to HMRC when they asked the question. If we hadn't taken that precaution, and it turned out that the claimS had indeed been incorrect, we'd be embarrassed when HMRC then asked what measures we had taken to get our clients' tax returns correct. "Nothing to do with us Guvn'r" would probably mean we had a whole lot more "defending" to do.

Anybody thought about PII requirements in this context?

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By North East Accountant
08th Apr 2021 13:06

Are you saying that we should be fully assessing and auditing all clients SEISS claims when preparing a Tax Return?

If so what are you increasing your fees from and to?

It's a virtually impossible job what with the nature of the SEISS claims and the subjectivity of the guidance. eg. adversely affected... what does that mean? We can come up with a hundred different answers to that one question alone.... all of which might be right.

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By Tax Dragon
08th Apr 2021 14:30

North East Accountant wrote:

Are you saying that we should be fully assessing and auditing all clients SEISS claims when preparing a Tax Return?

No.

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By jonharris999
08th Apr 2021 13:23

"We'll see, I guess."

I don't think we need to. The Directions for R3 were specific about this (I carefully choose the word 'specific', not the word 'clear'). Applicants were to judge their forecast relative to the forecast they would reasonably have expected to make, had there been no crisis. For Rs 1&2, any adverse effect at all.

I maintain that this should make the vast majority secure in any review of their applications, and that the problem is that it doesn't look like that until you look closely and think hard.

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By Hugo Fair
08th Apr 2021 16:30

But the key points that (I think) TD was making, and with which I agree, was:
* "Do you maybe think you should ask about the evidence that the client has kept in support of the claims?"

In the same way that the client didn't need perfect foresight at the time of making the claim, they should not (and won't be) allowed to retrospectively define the basis of that decision to claim 6+ months ago.

They will be expected to have documented (and maintained) the basis of that decision at the time it was made ... and should be comfortable in 'sharing' that documentation with their accountant - in order to be appraised of the likelihood of it being acceptable to HMRC (if enquired after).

So that's not "fully assessing and auditing" the claims, but is a precautionary (and I would have thought normal) discussion between accountant and client.

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By Tax Dragon
08th Apr 2021 17:42

Thanks Hugo. Join the club (which includes quite a few in here) of those that say what I mean better than me.

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By More unearned luck
08th Apr 2021 19:19

I concur with TD and Hugo. I add that your "nothing to do with us Guvn'r" attitude is likely to lead to you breaching the PCRT standard. In particular you have a duty to act in the client's best interest and accepting a statement from a client you believe to be false or accept recklessly isn't doing that. You should exercise appropriate professional scepticism.

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By jonharris999
09th Apr 2021 07:41

I hazard that less harm will be done by those who do nothing, leading at worst to their clients being obliged to provide some evidence to HMRC if asked that they were not either brazenly lying or hopelessly mis-forecasting when they made their applications; than those who half-understand the rules and incorrectly advise their clients to repay if they have had a better outturn in the event than they expected.

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By Tax Dragon
09th Apr 2021 09:29

Harm? I love these undefined non-tax terms. What is 'harm'? Who or what are you envisaging being 'harmed'? How?! Specifically, if someone's business was not adversely affected by the events of 2020, but that someone received (possibly multiple) grant(s) etc to 'help them through', what 'harm' would there be if that someone repaid the money they didn't need? (Even if they legitimately thought at the time that they would.)

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By jonharris999
09th Apr 2021 10:49

Ah, so according to Dragon, we are now to do away with all legislation and guidance, and simply work to a system where people's accountants decide how much money they need, and assess all the rest as tax due.

If someone is incorrectly told by their accountant to repay a R3 grant because their outturn was better than their previous year's (there was an example of this on another thread yesterday, and anecdotally there are plenty more), then that accountant has caused them the harm - legal, moral and in every way imaginable - of advising them on an incorrect assessment. We are bound - legally, morally etc etc - not to do this. If you do not think this is harmful we're going to have to agree to differ.

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By Tax Dragon
09th Apr 2021 11:01

It was a question, Jon. I didn't know what you meant, you have explained, that's how questions work. I did not say anything such as

jonharris999 wrote:

Ah, so according to Dragon, we are now to do away with all legislation and guidance, and simply work to a system where people's accountants decide how much money they need, and assess all the rest as tax due.

Please don't attribute such utter nonsense to me. I can write my own utter nonsense without you fabricating more on my behalf.

jonharris999 wrote:

We are bound - legally, morally etc etc - not to do this.

("This" being advising them on an incorrect assessment.) So in fact we agree. We are duty bound to consider whether tax arises under Sch16. Or whether, indeed, it doesn't.

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By jonharris999
09th Apr 2021 10:49

*

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