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is anyone else astounded at the profits being made

grants a go go

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I knew this was going to happen to some, but I must admit I have been astounded at how much taxable profits have been made by some clients due to the various grants, in some cases clients have made 3 times their normal annual profits, by far the biggest winnners being those with a business premises with very low costs.

Of course there are plenty at the opposite end of the scale, surely at some point there has to be a proper enquiry into all this.

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By 0098087
24th May 2021 10:33

Yer, what with the government as bent as a 9 bob note. A PM who slags off the BBC but falsified a news quote in 2008...and has no morals. But hey..he's marvellous (just quoting the Mail, Express, Sun, etc...etc..

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Replying to 0098087:
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By vstrad
26th May 2021 10:38

What have morals got to do with tax? Next you'll be telling us that everyone should pay "the right amount of tax" whether the law requires it or not.

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A Putey FACA
By Arthur Putey
24th May 2021 10:50

.... who will now be complaining about the amount of tax they have to pay and asking you what you are going to do about it!

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Replying to Arthur Putey:
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By 0098087
24th May 2021 11:05

What do you mean the grants are table???

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Replying to 0098087:
paddle steamer
By DJKL
24th May 2021 11:13

Mensa, perhaps.

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By TessaW
24th May 2021 11:17

Its not just grants. I have a small company client where the 2 directors (married) were aiming to retire last year as the business had just wound down. Instead they have carried on & so far claimed £50K furlough - one of them is working one day a week. They have a nice profit in the accounts at the moment but will presumably make a hefty company pension contribution to clear that out. Of course they are paying PAYE etc on the wages so I guess some compensation, but the various payouts do seem to seem to have been very generous for some. I don't understand why furlough is going on for so long this year.

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Replying to TessaW:
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By Bobbo
26th May 2021 10:20

If they were planning to retire last year i'm not sure what job is being retained by this company claiming job retention scheme grants

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By coops456
27th May 2021 10:49

We've seen similar things. Furlough should be limited to hospitality and entertainment sectors now.

I sincerely hope that any company whose turnover increased during the pandemic is made (either legally or shamed into it) to repay CJRS monies.

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By Mr_awol
24th May 2021 11:19

It seems to me that most people are up on a normal year, with a minority having lost out - but those that have lost, have lost heavily.

I even had a pub that had made substantially more than previous years, based upon grant eligibility and the fact that it has a large outdoor area in a prime tourist location. Rates grants aplenty, staffing covered by furlough for much of the year, and a sweet spot in the summer where half the country was on furlough and spending it on booze.

Rumours are that another local pub was doing a roaring trade throughout the summer and also the winter, due to illicit opening. Not my client thankfully but it does occur to me that they will have made a killing - on the basis that it's not like they can really declare any VAT or tax, as they weren't supposed to be open. Not sure where they were getting their beer from but you would have thought HMRC would be poking around the breweries and wholesalers and find out who they were selling to, and then seeing if those who were buying have declared proportionate sales income.

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By I'msorryIhaven'taclue
24th May 2021 11:20

So there'll be a clawback of those grants, via taxation, for those who did well from it.

That puts me in mind of the start up grants back in Thatcher's Britain, whereby newly self-employed people who had spent the requisite amount of time unemployed qualified for a £40 week grant during their first 12 months (worth £100 pw in today's money).

Trouble was it was taxed as regular s/e income, a somewhat late / retrospective decision I seem to remember, which meant it fell into the initial basis period upon which the first 3 years (and, occasionally, 4 years) taxable profits were based. For many the clawback of this generous government grant was around 120%! (And the alternative of electing to be taxed on an actual basis often produced an even more expensive result).

I expect the only enquiries we'll see will be HMRC forensically scrutinising every grant with clawbacks in mind. Not yet, of course, as the highly infectious Indian and newly discovered and virulent AV.1 Covid strains should ensure that we'll all be locked down again before the summer's out.

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Replying to I'msorryIhaven'taclue:
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By Mr_awol
24th May 2021 11:29

Not all the grants.

I have several clients who, for various reasons, need full time staff throughout the year but effectively 'find them something to do' during quiet periods.

A former colleague was furloughed through the 'traditionally quiet period' following the SA deadline. Normally they would have been kept busy with something, even if it was just admin tasks. Now those jobs will get squeezed into other times (maybe) and the firm will scoop up the furlough subsidy that actually had little (if anything) to do with Covid.

My pub, described above, is fully entitled to all of its grant income so wont pay back a penny. They, i think, are probably in the minority of course.

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Replying to I'msorryIhaven'taclue:
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By Paul Crowley
24th May 2021 11:33

I remember that grant
Lots claimed, ceasing after a year with zero self employed income.

In those days an accountant could double the year 1 fee and client saved money. Tax saving exceeded the fee.

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Replying to I'msorryIhaven'taclue:
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By Calculatorboy
25th May 2021 02:56

But they could have elected for actual

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Replying to Calculatorboy:
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By I'msorryIhaven'taclue
28th May 2021 13:05

Some did, but it didn't always work out cheaper. No overlap periods then, so you'd have initial year or so taxed multiple times and other periods not taxed at all.

For many it meant the claw-back of that start-up grant would be >100%. I can't recall whether anything was ever done to shift those grants to case VI income (I moved firm and no longer had a tax guy in the room to listen to - just auditors. There ought to be a collective noun for that.)

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By Paul Crowley
24th May 2021 11:26

I have not had the usual rush of subcontractors looking for refunds
I think they know that it is the other way around this year

SEISS was outrageously generous, A complete pig's ear of wasted money that should have been better aimed at the needy.

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Replying to Paul Crowley:
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By Di
26th May 2021 09:47

I think that the problem was that SEISS was all or nothing so everyone went to claim it.

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Replying to Paul Crowley:
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By Lawrence82
26th May 2021 10:20

For the most part, I'm not even convinced subbies or anyone in the building trade should have claimed given that was one of the sectors seemingly unaffected by the first lockdown to a large extent.

Then again, initially the wording was vague enough that they probably can justify it - whether morally right to or not. We've had a few honest types that didn't but on the whole they have claimed which is disappointing to say the least and puts agents in an awkward position.

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By ireallyshouldknowthisbut
24th May 2021 11:59

There is a reason why 2nd hand car sales spiked and house priced have gone bonkers.

The amount of cash being pumped into the economy is vast.

Don't mention "inflation".

my local pub has been packed out, people in there I have never seen in my life (and this is a local village pub). The owners did so much trade between lockdowns last year they seemed almost happy to be paid to be shut earlier this year. I stopped going in the autumn due to how busy it was. 2 years ago it was easy to socially distance, there was about 10 of us in there at any time, and often 4 or 5 would be all you would get all night on a Wednesday night. Now its 50+.

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Replying to ireallyshouldknowthisbut:
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By I'msorryIhaven'taclue
24th May 2021 13:36

I've got used to paying a pound a pint from Lidl, not to mention a bottle of wine for a fiver rather than £8 a glass from a carton in our local inn.

Pubs will do well from the football this summer, and I'm sure we'll all have more fun than monkeys on a banana boat. But long-term I'm not so sure. Their very essence - the reason people shell out an afternoon's wages on a round of drinks that would cost them an hour's pay in a supermarket - seems to me to be dependent upon socialising and mixing. And since that will be verbotten, what'll be the point?

Hungry? Phone Just Eat or head to KFC! Want to talk? Go online (join Aweb, even)! Desperate to hug someone? Join a football team! All of which should put you quids in!

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Replying to I'msorryIhaven'taclue:
A Putey FACA
By Arthur Putey
24th May 2021 16:09

I could not believe to imagine what state a Big Mac delivered 5 miles on a moped would be like ..... and thats before the 30 second blast in the microwave.

One good think about lockdown was the absence of McLitter

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Replying to Arthur Putey:
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By Hugo Fair
24th May 2021 16:27

Probably indiscernible state from a Big Mac served at the counter ... but I'm not prepared to sample either variety purely in the services of scientific research!
However I agree about one of the (many) benefits of lockdown - as a consumer of course rather than as a producer/retailer.

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Replying to Hugo Fair:
paddle steamer
By DJKL
24th May 2021 16:43

At least a Mac is not a Max Burger.

You know the song about walking 500 miles and then 500 more, well we now drive 50 miles and then 50 miles more to avoid a Max.

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Replying to Arthur Putey:
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By I'msorryIhaven'taclue
24th May 2021 17:41
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paddle steamer
By DJKL
24th May 2021 12:03

Well, no grants for us, no loans, no furlough and we are down in 2020 compared with 2019 and will be down again in 2021. We are now getting to the actual write off stage with our tenants' rents etc , what were previously deferrals becoming forgiveness.

It is a mixed bag, some seem to have prospered, one has effectively closed (Brexit not Covid), one is still within a CVA, it is hard to get visibility regarding the rest but the truth will be once financial support does get fully removed at which juncture I do expect to see some significant increases in staff losses and closures.

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Egg
By EGG
24th May 2021 13:16

Agreed,

Most of my returns prepared to date have got balancing payments to make as a result of the SEISS grants.

Profits are down in all cases, but it seems that in the vast majority of (my) cases the SEISS grants have been too generous to compensate for the reductions.

Case in point today - turnover 31% down, profits down £6K, SEISS received in grants 1/2/3 - £10K, overall up by £4K

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Replying to EGG:
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By Paul Crowley
24th May 2021 13:23

I suspect that will the norm.

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Replying to Paul Crowley:
paddle steamer
By DJKL
24th May 2021 13:40

Maybe only with your smaller clients, further up the foodchain life may well be slightly different and if these larger SMEs have suffered (as support relative to their size has been much lower) this damage may possibly fall back down the foodchain over time.

From my perspective it is our tenants say paying £25k-£50k per annum rent who look to be the most exposed, the smaller rent ones seem, proportionately at least, to have been better supported.

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Replying to DJKL:
Egg
By EGG
24th May 2021 13:45

Can't argue with that analysis. Fixed overheads make a lot of difference to these calculations when the SEISS is based on profits, which with larger fixed overheads that soon gets swallowed.

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By bluebaron
24th May 2021 13:50

Nearly every set of accounts I have done where the client has received government support, whether it be furlough or SEISS (& rates grants) has shown an increase in profit, and got more money in the bank that ever before. Yes, the clients have got higher tax bills now, but it's ridiculous, and to be honest I'm disgusted by it.

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Replying to bluebaron:
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By I'msorryIhaven'taclue
24th May 2021 14:07

Don't be. They'll soon enough spend it all.

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Replying to I'msorryIhaven'taclue:
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By bluebaron
24th May 2021 14:35

Yes, they probably will, and will still moan about their higher tax bills..!!

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By hfiddes
25th May 2021 11:35

One of my charities has managed to turn a profit due to the rate-related grants but will definitely be spending what's left next year when they have to put on shows with much lower audiences. They are more than happy to pay the tax though - the money saved them from closing down after nearly 100 years.

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Replying to hfiddes:
paddle steamer
By DJKL
25th May 2021 15:16

Charity? Pay Tax?

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By Lawrence82
26th May 2021 10:26

One of mine has shown a 400% increase in grants. £12,000+ of this they spent on a candle art installation which looked like it should cost a fraction of that, but you can't put a price on art eh?

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Replying to Lawrence82:
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By hfiddes
28th May 2021 11:27

Must have bought an awful lot of candles - were they hoping to benefit local artists via the 'drip down' effect?

I'll get my hat...

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By Justin Bryant
24th May 2021 14:37

Yes; yet ignorant and/or dumb business journalists still write stories along the lines of "XYZ firm's profits up despite Covid" rather than "XYZ firm's profits up due to Covid".

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Replying to Justin Bryant:
Psycho
By Wilson Philips
24th May 2021 16:37

Not the same as, but similar to, the daily tally of numbers of deaths "with " COVID rather than a more meaningful deaths "due to" COVID.

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Replying to Wilson Philips:
A Putey FACA
By Arthur Putey
24th May 2021 17:48

... which would be a meaningfully lower figure, to which could be added the excess deaths from other causes as a result of diversion of NHS resources away from them.

Maybe they could add a category for "deaths due to excessively high levels of government support".

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By FCExtraordinaire
25th May 2021 08:05

Yes, they were happy to get the grant and are now complaining about the tax bill.

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By sanjay100
25th May 2021 10:40

Those who do their own tax return don't realise SEISS grant is taxable so will not include them on the tax return then I don't know if HMRC are organised enough to realise the grant is missing. There will be too many cases

I don't know why the SEISS grants cannot be automatically entered on the tax return, Would save HMRC a lot of hassle.

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By Roland195
25th May 2021 14:40

The part that I am astounded at, is that so many of the business owners in receipt of grants & furlough funding, directly or otherwise were perfectly entitled to take up paid employment elsewhere.

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Replying to Roland195:
blue sheep
By Nigel Henshaw
25th May 2021 14:56

Roland195 wrote:

The part that I am astounded at, is that so many of the business owners in receipt of grants & furlough funding, directly or otherwise were perfectly entitled to take up paid employment elsewhere.

Yes, I know employees that have been paid 80% salary for doing no work at all for over a year and they were able to find extra work on top with other employers, absolutely crazy

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Replying to NH:
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By Roland195
25th May 2021 16:09

Aside from the fact that it defeats the purpose of paying furlough in the first place - it's not safe for you to come into the office you work from usually but absolutely fine to work in a supermarket, I know some employers at their wit's end trying to persuade their employees to actually come back to work when it interferes with their new shifts.

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Replying to Roland195:
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By Hugo Fair
25th May 2021 17:25

"I know some employers at their wit's end trying to persuade their employees to actually come back to work when it interferes with their new shifts."

* Employer A employs employee 1 and then agrees to furlough that employee ... during which period employee 1 takes a separate employment with employer B. So far OK legally (although IMHO crazy that loophole deliberately left in place).

* Employer B is happy to keep employee 1 in employment, but Employer A wishes to cease/shorten furlough so requests return of employee 1. Again, so far fine - there are two valid employment contracts in place, which is OK so long as they don't clash.

* But they do clash (by the sound of it). So employee 1 is the one with the problem (two contracts which he/she can't meet simultaneously) - and will have to break one or other of the contracts. (and take the consequences).

It may sound harsh (and is almost certainly yet another example of a scenario that was easy to forecast but not thought of by those making the legislation), but that is the reality.
When Employer A informs employee 1 of the additional hours to be worked (presuming that these are within the T&Cs of the contract), then the employee either accepts them or rejects them. Refusing to work is a pretty fundamental breach of contract and in most cases will justify disciplinary action and probably dismissal.*

* = There can be extenuating circumstances (mostly to do with H&S concerns of employee, but these can usually be mitigated fairly simply by employer).

None of this is to say that the employer may not choose to negotiate with valued employees - but doing so immediately weakens employer's position above.

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By 0098087
25th May 2021 14:53

We worked our butts off for 15 months sorting out their messes. 80 claims a month for PAYE, all manual and got not a penny. Not that i feel terrible sorry for people who lost their jobs, lives and real hardship but the lazy sods didn't deserve what they got.
Lockdown ends June 21st. Furlough should end July, except for the travel industry. Done deal.

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Replying to 0098087:
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By Dr Fauci
26th May 2021 10:26

Until, of course, they lock us down again.

Furlough is due to end in September...for a reason.

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Jennifer Adams
By Jennifer Adams
26th May 2021 09:42

Paul says that he has not had the usual rush of CIS refunds. I have had the usual but when I explain that their tax refund is substantially lower this year because of the government grant from one I got the ' my mate has received £2K - why have I only received £1K?' Some dont understand that the day of reckoning has come and as Sanjay says - I think that many those who have done their returns themselves might have not included the grant.

What I have noticed is that the CIS refunds are taking an inordinately long time to arrive.

Have you had this?

One of my CIS clients worked all the way through and claimed - he proudly told me that he had spent the money on an outside hot tub.

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Replying to Jennifer Adams:
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By Golum15
26th May 2021 09:49

Returns that have SEISS mentioned on them are being manually checked by HMRC (computers were meant to do this, but they are not working correctly) I think current time frame is mid July. No doubt that will extend as more returns are submitted.

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Replying to Jennifer Adams:
A Putey FACA
By Arthur Putey
26th May 2021 13:57

brace yourselves for a chlamydia epidemic!

[Edit: well not "yourselves" literally, unless you have used your client's hot tub!]

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By Ammie
26th May 2021 10:02

Reading through these comments I recognise the scenarios as mine!

Most claims will pass through and with no query from HMRC, who have not got the resources to raise many enquiries, probably just some of the huge claims, some of which have already been laid out as a toothless warning.

It has been a frenzy of free money thanks to a shocking level of mismanagement by HM Government, mindful of forthcoming votes they may lose, no doubt.

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