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SEISS 4 and Profit Reduction

Two years involved?

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Does anyone else find the guidance for SEISS 4 problematic? It says "you must decide if the impact on your business between 1 February 2021 and 30 April 2021 will cause a significant reduction in your trading profits for the tax year you report them in" - so a client with a 5 April year end needs to consider not only if 2020/21 profit is likely to be down but also whether 2021/22 will be similarly affected? Is an expected reduction for 2020/21 enough? Or do they need to anticipate that 2021/22 will also be reduced to make the claim?

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By fawltybasil2575
20th Apr 2021 10:38

@ sijolees (OP).

As ever, it is the legislation itself which provides the definitive answer to your query. This is that legislation, ie the Treasury Direction for SEISS 4:-

https://assets.publishing.service.gov.uk/government/uploads/system/uploa...

If you would kindly scroll down to Para 7.3(b) you will note the words:-

“significant reduction in profits for A (emphasis added) relevant basis period”.

If I understand correctly your question, the client’s accounting year ended on 5 April 2021 - there are therefore TWO “relevant basis periods” in your client’s case (the years ended 5 April 2021 and the year ended 5 April 2022). Hence, the requirement is that the condition is satisfied if there has been/will be a “significant reduction in profits” for EITHER the year to 5 April 2021 or for the year to 5 April 2022. In your client’s case, if the client has ALREADY experienced that reduction in profits for the year to 5 April 2021, then the condition has indeed been satisfied.

Basil.

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Replying to fawltybasil2575:
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By sijolees
20th Apr 2021 11:04

Thank you Basil, that's really helpful.

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Replying to sijolees:
By SteveHa
20th Apr 2021 11:26

The legislation is crap. Subjectivity being given to the term "substantial". Remember when legislation was clear and non-subjective? No, me neither. We need better architects.

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By jonharris999
20th Apr 2021 10:50

I vote yes, no, yes to your three questions.

I don't see this as especially problematic.

Can you give an example, for the sake of argument, of someone who cannot reasonably forecast today (I haven't heard of a claim date earlier than today) that they have or have not had a significant reduction in demand etc which will make their profit in either accounting period less than it would have been if there had been no crisis?

I appreciate that 6-30 April might be a very short time period for many businesses to forecast in. But it ought to be relatively clear whether or not there is a significant reduction in demand.

For example, it seems pretty clear that a hairdresser working 9-5, Mon-Sat will not make as much if they are open from 17-30 April as they would have done if they'd been open 6-30 April.

Any actors' agent you ask will tell you that the number of auditions on offer this month is still way fewer than it would be if there were no crisis.

Etc.

**EDIT - I wrote this before I read Basil above. As usual, he's right and I'm wrong. Leaving my post here anyway because I still believe my point about examples to be pertinent.

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Replying to jonharris999:
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By sijolees
20th Apr 2021 11:06

Thanks for responding and I take your point regarding reduced demand. It is the requirement to guess what the end profit will be for 2021/22 that is the problem for me.

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By Michael Davies
20th Apr 2021 12:44

Managed to get my hair cut this am and was immediately shown to a chair.He said that last week had been mega busy;he had also put in a considerable price increase.I suspect if restrictions continue to be lifted then 21/22 could well be a bumper year.The “either” part in the guidance may well be significant therefore.

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Replying to Michael Davies:
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By jonharris999
20th Apr 2021 13:53

Notwithstanding the fact that, as you say and as @Basil correctly identified, the "either" part provides the answer to the OP, you also raise the separate question of whether a positive 'bounce back' renders a claim ineligible. I don't see how it can. Granted, it is open to a claimant to make a reasonable forecast that i) there will be a bounce back and ii) that will lead to no significant reduction in the period. But this is, of course, to look into the future. It is surely equally open to the claimant to make the equally reasonable forecast that there will be no, or only a modest bounce back. In the majority of industries there will be evidence that can be found at the point of claim to support the latter, and there will be, as has been stated many times in other threads, no onus on the claimant to make a retrospective judgement about how things actually turned out - that is not the question.

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By S_Cristian
30th Apr 2021 09:29

I'm quite confused about the SEISS 4th profit eligibility criteria. My case is the following: for Feb 2021 - Apr 2021 - 40% reduction in income compare to a normal period. So obviously my profit for this period is significantly reduced. For the whole tax year 6 Apr 2020 - 5 Apr 2021, my income was down aprox 50%, but if I take into account the previous 3 SEISS grants (which I claimed), then my annual turnover is roughly the same as previous tax year. My question is, do I need to take into account the first 3 Grants when calculating the annual profit ?

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Replying to S_Cristian:
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By jonharris999
30th Apr 2021 09:49

No, you do not count the earlier grants.

Also, don't compare any period to a previous period. The legislation for Rounds 3 and 4 does not ask you to do this. It asks you to make a reasonable judgement about what your business affairs would have been like in the period compared to how they would have been if there hadn't been a crisis. Comparing them to an earlier period may certainly inform your reasonable judgement, but evidently isn't quite the same thing as you are being asked.

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By fawltybasil2575
30th Apr 2021 09:49

@ S Cristian (your 9.29 post).

To hopefully reassure you, the 3 SEISS Grants received are specifically to be IGNORED when considering the profits figure (in relation to which the decline in Turnover, in the 3 months to 30 April 2021, is required to be “significant”). Hence, on the basis of the facts in your question, you ARE entitled to SEISS 4 (assuming of course that you are not in breach of any of the other requirements).

For the avoidance of doubt, the SEISS Grants received in 2020/21 should be included in Box 27.1 (if “SES” pages are used)) or Box 70.1 (if “SEF” pages are used) on the 2020/21 Tax Return..

Basil.

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By fawltybasil2575
30th Apr 2021 11:25

@ S Cristian.

Noting that the highly knowledgeable jonharris999 posted at exactly the same time as I posted, I of course endorse his valid warning:-

“don't compare any period to a PREVIOUS (my emphasis) period”.

Noting your words “reduction in income compare to a normal period" (and specifically the word “normal” therein) I interpreted those words to mean what would have occurred if your business had not been adversely affected by coronavirus (ie the point succinctly made by Jon).

Basil.

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