Retrospectively reviewing SEISS eligibility

How do you know whether a client was eligible?

Didn't find your answer?

I suspect like many others, having finally seen the end of the furlough claims and their ever changing rules, I am now pulling my hair out trying to retrospectively understand the shifting goalposts of the various SEISS grants.

I understand that as a professional, I need to have some comfort that my clients were eligible for the SEISS grants that they claimed before completing the SEISS section on the SATR.  What would be really helpful would be to see the pages that my clients clicked through and the questions they answered when making their claims - the stuff I was specifically exluded from at the time.  Is this available anywhere?  Google isn't helping!!

The tax return I'm in the middle of is for a client who, in 2019/20, worked in a shop on a self employed basis and sold a few items in the shop.  She purchased the shop in February 2020 with a view to working in the shop full time.  When considering the impact of Corona Virus, am I looking at her self employed income or the expected shop trade (bearing in mind I do not have access to the shop's prior year trading figures).

SEISS 1 is easy - the shop was shut so she was struggling whichever comparison you go with.  But after that, does she need evidence that the shop was doing less trade because of CV, or that she was personally doing less trade?  Or, was she ineligible because she, sort of, changed trade - even though she was working in the same shop albeit now as the proprietor.

How are people broaching this with their clients?  If I had the questions, it would be straightforward to walk through how she answered them and agree whether what she put was / wasn't reasonable.  But I'm just wondering about in the dark here!!  Trying to find answers takes so long, and it's not time that can be added to her bill which is more unpaid CV work!!

Any help much appreciated.

 

Replies (36)

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By GHarr497688
24th Nov 2021 13:33

The client understands their own business more than you. You are not required to be judge and jury and you are not required to be a Tax Inspector or similar. As such I don't believe your work requires you to advise clients on if a claim should or should not be paid back unless something very obvious comes to light like a business claiming when they have ceased to trade prior to the Coronavirus pandemic. I am worried that you think you have such power.

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Replying to GHarr497688:
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By lionofludesch
24th Nov 2021 14:54

GHarr497688 wrote:

The client understands their own business more than you. You are not required to be judge and jury and you are not required to be a Tax Inspector or similar. As such I don't believe your work requires you to advise clients on if a claim should or should not be paid back unless something very obvious comes to light like a business claiming when they have ceased to trade prior to the Coronavirus pandemic. I am worried that you think you have such power.

Actually, whilst it might be legally OK to ask "what's it got to do with me?", I agree with Really and Drags.

I would want to give my clients, if I had any, enough information to keep them out of trouble. Reviewing claims made would be a part of that. Claims 1 and 2 were fairly straightforward but I doubt if the rest were fully understood by many claimants.

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Replying to lionofludesch:
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By jonharris999
24th Nov 2021 16:23

I am a +1 about Really and Drags, although has Drags agreed to being called Drags?

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By ireallyshouldknowthisbut
24th Nov 2021 13:42

This is quite useful

https://www.accountingweb.co.uk/tax/personal-tax/ready-for-a-seiss-chall...

I have found these a real pain to do. The first 2 grants are fairly easy, but the 3rd and 4th can be highly subjective given the basis is "what they expected" not "what they did last year". Virtually none of my clients really understand the rules around this and I am not convinced I do really either.

I assume HMRC will just mechanistically "nudge" (ie sending snotty letters or just bang in a fine) to those claiming 3rd and 4th when their results for 20/21 are not much impacted when comparing with the past, but we just don't know yet.

I disagree very strongly with the suggestion it is not our role to guide clients in this matter. Indeed I would go as far to say I would consider myself negligent if I did not consider the matter with my clients and try and explain it to them. Its part of the tax return, so its part of my role along with student loans, child benefit and all the rest of it.

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Replying to ireallyshouldknowthisbut:
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By Tax Dragon
24th Nov 2021 14:17

One of the best comments I have seen in this forum on this difficult subject. Thank you.

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By Paul Crowley
24th Nov 2021 15:10

Almost impossible to police this
Reason is that we are looking with hindsight
1 and 2 Anyone can claim, adversely affected was pretty much it
3 The test is at the time of the test. Expected position, no rule says pay it back if things worked out better than client at the time expected to happen.
I am still sat on one that claimed 3 that I have yet to decide on, not helped by the fact that HMRC appear to be waiting out and making no challenges until it is too late to be on time with payment
There is no help anywhere to guide the thought process on whether that client's expectation was unreasonable.

This is a tax on being reasonable or having a conscience.
As such is it a logical tax?

Followed to its logical conclusion, the return showing the claim as in error is clearly late as the overclaim should have been repaid months earlier

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Replying to Paul Crowley:
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By Tax Dragon
24th Nov 2021 15:31

Understand that in HMRC's mind, you are already policing such matters as whether this or that cost was incurred wholly and exclusively for the purposes of the business (a question which the courts have told us requires knowing, not only what was in the conscious mind of the client, but their subconscious motives too!) At least this time all the tests are (AFAIK) conscious ones - so you can ask the client about them. As stepurhan hints, if you suspect the client's reply is a lie, you have a bigger problem than what you put on the tax return.

Incidentally, as I have said before, I don't understand the "we should have been involved at the time" argument. Of course we couldn't make claims (and be thankful for that, else you'd be facing multiple court cases now) - but we could advise about them. We weren't "cut out of the process", other than by clients not asking.

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Replying to Tax Dragon:
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By Paul Crowley
24th Nov 2021 15:42

HMRC does not have either a mind or a conscience
Intension of parliament is single direction
If taxpayer gets swept in as collateral damage then HMRC accept all freebies

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Replying to Paul Crowley:
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By Tax Dragon
24th Nov 2021 16:25

My bad - ignore the handful of words before the first comma.

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Stepurhan
By stepurhan
24th Nov 2021 15:17

I think that we should not be expected to police this, with HMRC having chosen to cut us out of the process. If we had been involved at the start, we could have asked the client the difficult questions before any claim.

However, that is not to say that we should not alert clients when we think there is a potential issue. If a business has profits the same as previous years, ask clients why they thought they were affected. If a client stopped getting income because of lockdowns, and did not appear to restart, ask why they thought the business would continue when claiming.

As long as they give halfway decent answers to those questions, I have no problem submitting returns treating the grants as non-repayable. We've alerted clients to potential HMRC avenues of attack (thus providing guidance) but, as with the original claim, it is up to them whether they are happy to face HMRC on that basis or opt to repay.

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By jonharris999
24th Nov 2021 16:21

For 3 and 4, what does she say when you ask why she reasonably believed that the crisis was reducing her turnover from what it would have been if there hadn't been one?

This forum has been full of accountants worried that their clients might not have credible answers to that question, but I'm not sure that we've uncovered even a single example which, on inspection, was not credible.

Round 5 was a bit more mathematical in some respects so should be easier to come to a conclusion on.

I fear we may be over-egging the pudding in many cases. Couple of simple questions, mostly simple answers; the evidence of this forum is that cases that do not fall into that category are rare or even non-existent.

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Replying to jonharris999:
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By Tax Dragon
24th Nov 2021 16:37

Well, a lot of accountants (in here anyway) seem to be saying they won't ask the question. So the cases in here probably don't reflect the full spectrum of answers/situations. I'm a little out of the loop atm but I am aware we have clients who (rightly) claimed, others who (rightly) didn't [because their business blossomed in lockdown in a way it wouldn't have otherwise] and others in a similar situation to the latter who did and who have repaid or will repay. I can't believe we are alone. In fact, I know we're not, because other Awebbers have reported similarly.

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Replying to Tax Dragon:
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By jonharris999
24th Nov 2021 17:48

I don't want to open an old can of worms here - no I really don't - but I don't really grasp why your third category there (claimed, but then business blossomed and are now repaying) exist, certainly not in any significant number. We have precisely 0 of these and I'll eat my hat if any come forward in the time remaining.

If their claim was based on legitimate belief when it was made then it does not have to be repaid. If it was not based on legitimate belief when it was made, then fair enough, but it seems extraordinary that you or any of our jolly nice regular contributors would have (m)any of these types.

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Replying to jonharris999:
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By Tax Dragon
24th Nov 2021 19:07

I think we know (or legitimately believe) from the previous discussions that we basically agree about much of this, but focus our concerns on different groups. I worry about the "not my problem guv" brigade. I've called it unprofessional before; ireally goes further above (and I don't disagree). You worry about taxpayers repaying when they don't need to. Either off their own bat or under the misguidance of their accountant.

Both concerns are valid, imho. And not mutually exclusive. (Pretty sure we've said and agreed that before too.)

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Replying to Tax Dragon:
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By jonharris999
24th Nov 2021 19:38

Yes, I certainly agree that "not my problem guv" really doesn't hold water.

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Replying to Tax Dragon:
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By gillybean04
25th Nov 2021 12:20

Agree with both your sentiments and those expressed by ireally.

I'd advise anyone of the opinion that they "were excluded from SEISS, so don't need to check it's right for the return" to check the code of ethics/conduct of their professional body and also the standards set by HMRC. I'd also check what the potential consequences are for any breach of those ethics/standards, and try to imagine how those potential consequences might impact on them personally, or on their clients.

Just to be crystal, I'm not saying what will happen. Just that they may wish to consider the possible consequences, before they commit to their position.

It's a disservice to clients (and to yourself as a professional) to allow personal grievances against processes to lower the quality of service and care you afford clients. You owe clients a duty of care. That doesn't change just because you've took the hump over something hmrc/treasury/hmg did.

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Replying to gillybean04:
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By Tax Dragon
25th Nov 2021 15:13

Very well said.

If I might just add… IMHO taking the hump, as you put it, is just so so soooo stupid anyway. Do these folk take the hump that a bank won't let them take out a mortgage on a client's behalf? Are they upset that it's not them completing their clients' applications for child benefit? Or obtaining (non-pandemic-related) grants? What about signing their clients' SPAs? Taking out leases? Etc.

FFS, we can't 'even' sign accounts or tax returns on clients' behalf. Nor should we be able to.

You're an accountant, not an attorney. Get a grip.

(Sorry... that was way more direct [ranty?] than I intended. Valid, though, right? And go me :~P)

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Replying to gillybean04:
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By Leywood
26th Nov 2021 07:10

Very well said.

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Replying to Tax Dragon:
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By Paul Crowley
25th Nov 2021 15:32

Yet to come across anyone who has repaid
One reason might be that there is no such obligation if the claim was an honest claim

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Replying to Paul Crowley:
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By Tax Dragon
25th Nov 2021 15:36

Whatevs.

Got it off my chest now. Feel better.

AWeb therapy.

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Replying to Paul Crowley:
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By Wanderer
26th Nov 2021 08:50

Paul Crowley wrote:

Yet to come across anyone who has repaid

We have.
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Replying to Wanderer:
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By jonharris999
26th Nov 2021 08:55

Are you able to describe the circumstances?

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Replying to jonharris999:
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By Ruth Pringle
25th Nov 2021 16:21

To be honest, Jon, I haven't asked her yet. I want to be completely clear in my head exactly what I'm asking before I broach the question. That's why I would really like to see the screens she went through when applying so that I'm asking the same questions and reading the same HMRC spiel.

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Replying to Ruth Pringle:
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By justsotax
25th Nov 2021 17:05

I can't say I disagree with the sentiment put forward by TD et al, we have a duty of care. But there is a line, its just where you choose to draw it.

The trouble is that we are not depending on some clear cut rules, which maybe supported by case law, we are simply left to decide whether the client was truthful in saying they were adversely affected (opinion over fact?).

So what happens if we had been given the job.....I am not convinced it would have been that different....we would ask the client were they adversely affected....? The only real difference is that we would have caveated the hell out of the claim.....but i am not sure that is providing a duty of care to the client....more just covering ourselves.....

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Replying to Ruth Pringle:
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By Tax Dragon
25th Nov 2021 23:01

Ruth Pringle wrote:

To be honest, Jon, I haven't asked her yet. I want to be completely clear in my head exactly what I'm asking before I broach the question. That's why I would really like to see the screens she went through when applying so that I'm asking the same questions and reading the same HMRC spiel.

I don't actually see the point of seeing the screens and reading the spiel, to be honest. It might even put you in danger of falling into the trap that Jon has written about so eloquently previously. Did you see this thread, for example? https://www.accountingweb.co.uk/any-answers/anyone-else-concerned-about-...

If a client believed the business was being affected as described, and if that belief was reasonable, then the claim is not invalidated by that reasonable belief subsequently proving to be erroneous.

Client should have contemporaneous evidence that you can look at (and HMRC can ask for - this could be the basis of your discussion) from when they made the claim that demonstrates the reasonableness of their belief.

For more, see Hugo's comment in that other thread - he really did say it better than me.

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Replying to Tax Dragon:
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By Tax Dragon
26th Nov 2021 02:16

Additional: FWIW, the only point (in relation to reasonable belief) that I have identified where I don't agree with Jon (as I understand him) is that he seems to think it is one test. Accordingly, claims were either correct (client believed what they said) or fraudulent (client didn't believe but claimed anyway); never (or virtually never) incorrect. But of course it's actually two tests, else there was no point including the word 'reasonable' in the rulebook.

As I say above I think it's evidence of that reasonableness that clients should be able to provide. Not of the belief itself. (As I've said before, if you think a client is lying about that, you have a bigger problem than what you put on their tax return.)

Clients can't actually tell you their belief was reasonable... ultimately that's for a tribunal to decide. But they ought to be able to tell you (with contemporaneous evidence) the basis on which they claimed. And, whilst the existence of belief is not disproved when the belief proves false, you do have to question the reasonableness of the belief when that happens.

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Replying to Tax Dragon:
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By Leywood
26th Nov 2021 07:14

[quote=Tax Dragon]

Ruth Pringle wrote:

I don't actually see the point of seeing the screens and reading the spiel, to be honest. It might even put you in danger of falling into the trap that Jon has written about so eloquently previously. Did you see this thread, for example? https://www.accountingweb.co.uk/any-answers/anyone-else-concerned-about-...

Client should have contemporaneous evidence that you can look at (and HMRC can ask for - this could be the basis of your discussion) from when they made the claim that demonstrates the reasonableness of their belief.

^^^^this, I suspect is where a lot of clients, or more likely the DIY class, will fall down. I encouraged all mine to keep notes, as memories fail.

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Replying to Leywood:
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By jonharris999
26th Nov 2021 08:30

Yes. Much as I dread them, we've got to get into some real challenges now if we are going to get any further with these questions.

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By Paul D Utherone
29th Dec 2021 21:01

Coming to this thread somewhat belatedly, but looking at a client with two sets of s/e pages covering separate sources [as an Artist, and as a Teacher of art]. They claimed Grants 1-3 which have been paid based on the total of the two sources average profits for 16/17-18/19.

What concerns me is that whilst the Teaching dried up in 20/21 and has only now restarted, the Artist results are pretty much unchanged from previous years. So should I be suggesting that the proportion of SEISS relating to the Artist source for Grant 3, and possibly also Grants 1 & 2, be repaid? And if not, or if only for Grant 3, presumably I apportion between the two sets of pages [FA20 Sch16(1)(4)] as putting all to Teaching will only give rise to a query in some fashion from HMRC.

Looking at the direction for Grant 1 - https://assets.publishing.service.gov.uk/government/uploads/system/uploa... - it says: "7.1 For the purposes of SEISS, the amount of trading profits for a tax year is equal to TIC – TL
where TIC is, ..., the amount of the trading income component of total income at
Step 1 of section 23 of ITA 2007 (the calculation of income tax liability) for that year, and
TL is the amount of any trading loss in that year." So looking at total profits from all business not trade by trade, and I know that overall profits were still hit, because one of the two trades fell away completely, so apparently no overpayment.

That said Para 7 is only to determine whether one is a qualifying person (YES) and of the two trades only one has suffered

The Direction for Grant 2 does not change the definitions above, so the same looks to apply.

Same in the Direction for Grant 3 - https://assets.publishing.service.gov.uk/government/uploads/system/uploa... - and "4.2 ... in relation to a trade—
(a) the business of which has suffered reduced activity,..."

I don't want to be saying to the client "I think your claims should have been restricted to the Teaching income only and you should be considering repaying the part of each grant that refers to the profession as Artist" if I am massively overthinking this.

They maintain records as a single business, but for reporting in the tax return I have always split the income & expenditure out into the separate trade/profession

I know that Grants 4 & 5 were claimed, but have not seen the figures yet, but presumably any claim there should only be on Teaching and ignore Artist as only the former business suffered a (drastic) reduction in income.

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Replying to Paul D Utherone:
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By Hugo Fair
29th Dec 2021 21:39

Whilst I follow your question (and the background facts), I'm puzzled as to the basis for you asking this.

You say "They maintain records as a single business, but for reporting in the tax return I have always split the income & expenditure out into the separate trade/ profession." How does your preference for reporting affect the status of the 'business' (which is clearly that of a single S-E taxpayer)?

If I suddenly decided to add a new 'wing' to my business (say offering advice on interpretation of emerging HR legislation), I wouldn't automatically assume that I'd need to set up a new business.
[If it was wholly unrelated, say a research service based on Blues records of the 1950s, then it might be more logical to do so ... but even then if everything was provided via me as a S-E person then I remain one S-E taxpayer].

On the basis of the info you've provided, the single entity suffered a decrease in Trading Profits (without any need to refer to individual contributory trading streams) ... so, in those terms at least, a claim was valid.

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Replying to Hugo Fair:
By Paul D Utherone
29th Dec 2021 22:59

I have considered them two separate and distinct trades to be reported independently. It had relevance for averaging of the artist income that some years ago now fluctuated between years - in more recent years it has been more level.

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Replying to Paul D Utherone:
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By jonharris999
30th Dec 2021 00:06

I think at first glance there's a problem here, although I'm extremely sympathetic to your client, who I presume didn't have a tremendously detailed grasp of why you were reporting 2 trades. It's another example of the disadvantage of us not being gatekeepers to SEISS claims - you'd have considered the problem more comprehensively in advance than your client can have been expected to.

The trouble is, it seems to me, that you can't have it both ways. You can't on the one hand report two trades so that one of them qualifies for averaging because its profits are derived "mainly" from the creation of work [where, one presumes, had you only reported one trade, the profits wouldn't have been "mainly" any more, hence you couldn't have averaged, otherwise as Hugo says, what would have been the point of reporting 2 trades]; -

- and on the other hand claim that the artist trade is a "trade the business of which has been adversely affected" - if indeed it hasn't.

So if it is really the case that the client i) didn't understand or fully understand the relevance of the difference between the 2 trades when making the claims; AND that ii) the artist-trade really did not meet the criteria for Rounds 1 and or 2 and or 3 ; then I think you should put to your client that they need to seriously consider a repayment, and that choice is theirs. (You are perfectly entitled to make that disclaimer, in my view.) And if they want to repay, I would indeed make an apportionment along the lines you have suggested, and I wouldn't worry at all about that giving rise to a query - bring it on - you have been scrupulous and conscientious.

That said, my red pen would hover for a long time over my condition ii) above. I'd bet my easel that the client had a reasonable belief, at the time the Round 1 claim was made, that the artist trade in and of itself was looking at adverse effect, and if so, that's a valid claim. I concede that this may be shakier ground for Rounds 2 and 3 but remember (repeating all the above and many other threads) that it doesn't matter how things turned out in retrospect - what matters is what he reasonably believed was happening at the time, and all to the good if he has evidence of such belief.

But if he genuinely didn't understand that he had to base his claims on the two trades separately, then I think you have uncovered that rarest of beasts - a genuinely mistaken, rather than dishonest, claim.

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Replying to jonharris999:
By Paul D Utherone
30th Dec 2021 00:29

Thanks, and yes in years when averaging was relevant “mainly” was a consideration in the split, though I think that they were distinct other than just for that. They have some shared costs for office costs and the like, but most expenses were clearly for one or the other.

This comes back to an interest as to what the client was presented with when making applications for each grant.

Were the applications pre completed with profit details, or indeed were any profit details required to verify qualification to claim? Because the directions refer to total s/e profits in considering qualification I wonder whether the claims maybe showed the total profits from returns with no split between pages in the return?

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Replying to Paul D Utherone:
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By jonharris999
30th Dec 2021 06:59

@Paul

Going on my imperfect memory, I think they did. There was no requirement for the punter to calculate anything in rounds 1-4, the amounts were pre-populated. I certainly did not hear of any case where, if someone has more than 1 trade, they were presented with a breakdown.

Into the realms of hypothesis now, but I wonder what would have happened if your client had, faced with the pre-populated claim, called HMRC and asked about this. I suspect he would have been told either to claim, or not to claim, or to claim and then repay what he thought was the right proportion along the lines we have just discussed.

IMHO the Directions simply do not provide for this situation so I maintain that the first step is to consider as hard as you possibly can whether the whole claim might have been legitimate - and I don't think that takes much. HMRC cannot come back and argue that a claim is illegitimate because a whole year in retrospect made more profit than a previous year: i) the relevant perspective is that of the time of the claim, not now; and ii) the relevant comparison is with 2020/21 in the non-Covid parallel universe, not with 2019/20 or any other year.

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Replying to Paul D Utherone:
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By Hugo Fair
30th Dec 2021 00:49

I understand that you report the "two separate and distinct trades" independently ... but that is presumably in terms of one single SATR, with a separate section to deal with each business (i.e. as part of tax calcs/reporting)?

However my point was that AFAIK - although a sole trader can have more than one business, he/she isn't legally separate from each sole trader business.
For instance a sole trader must consider their income from all businesses as part of determining the need to register for VAT.

So, as I said on the basis of the info provided, the single entity suffered a decrease in overall Trading Profits ... and thus, in those terms at least, a claim was valid.

EDIT: This crossed with your most recent post ... which neatly summarises the heart of the problem as "I wonder whether the claims maybe showed the total profits from returns with no split between pages in the return?"
And I'm afraid that I don't know the answer to that (but my suspicion is 'Yes').

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Replying to Hugo Fair:
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By jonharris999
30th Dec 2021 06:51

@ Hugo

I wish you were right, but I don't see how you get round "a trade the business of which has been adversely affected".

It doesn't say, for example, "a person the business of whom has been" etc.

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