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Is this a watertight correct SEISS 4 claim?

It goes to the problem of the definition of "trading"

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BIM 20000 and what follow it fall short of a definite definition of "trading" that can be used in all circs, as far as I see.

Prospective client was eligible for SEISS 1-3 on grounds of his trading history in previous years and his "intention to trade" in 20-21.

His sector was hit extremely badly by the crisis and although he made his usual efforts to trade, he did not succeed in achieving any revenue whatsoever in 20-21. 

He intends to trade in 21-22.

Do correspondents think that there is any possibility at all that he could be held NOT to have been "trading" in 20-21, and is therefore ineligible for round 4?

Never mind the perversity of it - focus on the wording.  Thanks.

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By jonharris999
26th May 2021 18:47

PS

I now read BIM48000 which makes me still more confident:

"Temporary breaks in trading activity do not amount to a permanent cessation of the trade for tax purposes. For example, if a business closed its doors to customers, or otherwise ceased trading during the coronavirus lockdown period, but intended to continue trading after restrictions were lifted, then the trade should not be treated as having ceased. Any income and expenses relating to the gap in trading will be taken account of in calculation of trade profits or losses, subject to the usual tax rules and case law.

This is dependent on the resumption of activities following the break being the same, or similar, to those prior to the break (see BIM80580)."

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By fawltybasil2575
26th May 2021 19:58

@ jonharris999 (OP).

It is of course not only SEISS 4 for which your client MAY have a problem, but SEISS 1/2/3 as well.

Before seeing your post at 18.47, I was intending to provide you with a link to BIM48000, so here it is anyway:-

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim48000

The eligibility to the SEISS Grants flows from the established Income Tax position. As often is the case, it is the INTENTION which determines matters; and hence if it can be established that the client intended throughout to "resurrect" the trade, then you should have no problem.

However, satisfying yourself that the SEISS claims have been (SEISS 1, 2 and 3)/will be (SEISS 4) valid is one thing; but disproving a possible challenge by HMRC is something else.

HMRC might, upon seeing the 2020/21 Tax Return, seek to challenge it (by informally asking questions; or formally amending it by “transferring” the SEISS Grants received figure from the “SEISS Grants entitled” Box to the “SEISS Grants overclaimed” Box).

I would recommend a “white space” entry on the 2020/21 Tax Return (notwithstanding its probably being initially ignored by HMRC) along the lines of:-

“The nil gross income figure [in Box x] on the Self-Employment page SE . . . . arises from the temporary hiatus in gross income being received, due to the Covid-19 pandemic (gross income, from the same or similar activities, having been received again after 5 April 2021)”

[The Tax Return should thus be submitted of course only after the resumption, noting your indicating that there is still only an intention to generate gross income again].

In implying no criticism, you do not indicate the nature of the trade, which may or may not be a factor in considering whether HMRC might challenge the SEISS claims.

You may wish to read the case law [as referred to in the BIM guidance, including BIM80580] to ensure you are on solid ground.

HMRC will be wary of the possibility of your client’s having decided to discontinue the trade in 2020/21, but then LATER deciding to “start again” in 2021/22, so as disguise the fact that their SEISS claims were invalid [hence the necessity for you to “get the full picture” so that you cannot be incorrectly later accused of assisting in their submitting false SEISS claims and/or an incorrect 2020/21 Tax Return – I am sure that you would do this without prompting from me :)].

Basil.

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By OldParkAcct
26th May 2021 22:35

Just because there was no income for a period, that does not necessarily mean there is no trade. Surely he still had some expenses, even if there was no income in the period, claim these expenses as a loss on the tax return rather than just report nothing.

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By Tax Dragon
27th May 2021 06:16

jonharris999 wrote:

Never mind the perversity of it - focus on the wording.  Thanks.

Having, of course, established the facts, which you will consider without prejudice. (Basil makes a good point about intentions not always being constant.)

As for the question... the wedding pub in Gretna Green was in the news when it reopened. It had been shut all last year. I don't think anyone would say that it had stopped trading. (Intentions here were constant.)

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blue sheep
By Nigel Henshaw
27th May 2021 07:11

as has been mentioned the "intention" is the key point here, but obviously that has to be backed up with some evidence - you say "he made his usual efforts" so presumably you can show that he did indeed intend/try to trade. records of emails, letters, phone calls etc? customers cancelling work?
If on the other hand he was sitting at home all year and says well I intended to trade but in actual fact didnt bother trying thats a different matter

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