Client has claimed for and received all 5 SEISS Grants without my involvement, each Grant in the amount of about £2,500 (£12,500 in total). So that will be three Grants in 2020/21 and two in 2021/22.
He has been a builder for a long time, but the arrival of Covid-19 in March 2020 marked the decline in his building activities, and in November 2020 he raised his final building sales invoice (coincidentally 30 November year end accounts). There is nothing to stop him doing general building work again.
A few months prior to that last building sales invoice he seized the opportunity to turn his hand to making high-end oak furniture. And in November 2020, just before his final building sales invoice, he had sold his first piece of oak furniture. After several months of intermittent furniture sales it has become plainly evident his "new" venture will be a success.
The "new" venture has been so successful he has no time (or inclination) for any of the old building work.
I would reckon his trade results for 2020/21 will be something like this:
A) Building trade profit for year ended 30 November 2020 - £2,000 + 20/21 SEISS Grants x 3 £7,500 = £9,500
B) Furniture trade profit in first trade period 1 November 2020 to 31 March 2021
Trade tax profit £6,000
P&M AIA CAs (£6,000)
Taxable profit £0
(He has other investment income in 2020/21 for the first time)
The issue I have is did my client qualify for all five SEISS Grants he applied for and received.
I believe he qualified for SEISS 1 & 2.
SEISS 2 was received in August 2020, and at that point in time I believe he could argue he intended to continue to trade (the "old" trade) in the 2020/21 tax year.
The rules for SEISS 3 were tighter. But one of the criteria for SEISS 3 was to do with business activity during the period 1 November 2020 to 29 January 2021. This is the approximate period when the building work seems to come to an end,
I cannot determine if there are one or two trades here. My client has jumped from general building work to furniture-making (high-end joinery). But he says he is using his building trade skills to manufacture the furniture.
I cannot determine from my research so far if what has happened makes any difference to my client's SEISS Grant claims.
Is it a case of someone's trade so badly affected by Covid that he is merely adapting his business and existing skills so that the furniture venture is simply the same old trade. Or, is the new venture too remote to be the same trade as builder.
My worry is this. Did the apparent cessation of the building work trade mean that my client claimed SEISS Grants 3, 4 and 5 in error, thereby potentially exposing him to the risk of penalties for overclaimed Grants.
On the other hand, if the furniture venture is the "old" trade morphing out of necessity, but remaining the same old trade, then maybe Grants 3, 4 and 5 were validly claimed. As you will see from the above calculation, the furniture venture necessitated the acquisition of specialist plant and machinery, and there will be stock on hand of materials at the year end for the first time.
If the furniture venture is the same old trade then it seems preferable to merely continue the accounts for the following year ended 30 November 2021. Then the problem will be do I change the SA Tax Return Page SEF 1 box 2 description of business from "Building Services" to "Joinery Work" or just leave it as "Building Services".
If HMRC are to take issue with any of the SEISS claims I would rather they do it sooner rather than later, and we do not wish to deliberately conceal anything from HMRC.
The only related information I have been able to find so far is to do with changes of trades in the 2018/19 and 2019/20 tax years. Official HMRC advice is that it matters not that you were a hairdresser in 2018/19 and car mechanic in 2019/20, even with a gap between trades. But this seems to relate to the need to have been trading in the 2019/20 tax year.
Any helpful comments would be appreciated.