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SEISS 4 claims - wording in online form

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Regulars have read lots from me on SEISS, and I don't want to be boring, but...

Client reports, having made his claim (and I believe him), that the online claim form did not use the word "significantly" when asking him to confirm his belief about his reduction in business levels.

He says the two phrases used in the questions, on successive screens, were "badly" affected and "a lot less" [income / profit].  

My main thought about creating this post is that I hope it will be here as a reference if clawback cases should start. I haven't sat down and thought through all aspects of this but off the top of my head, I construe that the process that drafted this wording was informed by human opinion that "significant" wasn't, they now realise, the word they should originally have used.

I will ask other clients who may not yet have made their claims to get screenshots, and it may be useful if someone else would do the same.  Thanks.

Replies (26)

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By Paul Crowley
25th Apr 2021 16:11

Why are HMRC so useless
Just weakens any later attempt to get a successful reclaim if clients are deliberately mislead
I have taken the opinion that I have no business advising clients on considering if they have claimed incorrectly
HMRC cannot be precise, Why should I bother?
And why should any client think I should spend chargeable time doing HMRC type enquiry?
If only they used an accounting term eg materially
Or simply use a number
£10 is badly affected for my mobile hairdressers
Also £10 is a lot less

So what does Significantly mean?
Badly affected and a lot less
Badly affected just means LESS
What is a lot? it means some
ENDEX HMRC fail once again

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By frankfx
25th Apr 2021 17:20

http://www.plainenglish.co.uk/

May need to call on their support.

Judge Richard Thomas, a regular and welcome contributor on this forum, may have some views he is willing to share with us.

Please!

Lewis Carroll , observed:

https://www.goodreads.com/quotes/7921298-then-you-should-say-what-you-me...

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By richard thomas
25th Apr 2021 17:55

At Frank's invitation, here goes.

As a Judge one can only look at the law to see who qualifies. This is in tertiary legislation, the Treasury direction of 6/7 April 2021.

Paragraph 2 sets out the purpose:

"Purpose of scheme modification and extension

2. The purpose of this modification and extension to SEISS is to provide for payments to be made to persons and relevant persons carrying on a trade the business activity or capacity of which, or demand for which, has been reduced, or cannot be carried on, due to the health, social and economic emergency in the United Kingdom resulting from coronavirus and coronavirus disease in the period beginning on 1 February 2021 and ending on 30 April 2021."

No definition of reduced is given.

The operative para is 7.3:

"7.3 Subject to paragraph 7.4, a claim may only be made for a SEISS 4 payment in respect of the period beginning with 1 February 2021 and ending with 31 (sic) April 2021 (“the qualifying period”) in relation to a trade-

(a) the business of which has suffered reduced activity, capacity or demand in the qualifying period from that which could reasonably have been expected but for the adverse effect on the business of coronavirus or coronavirus disease, and

(b) which the claimant reasonably believes will suffer a significant reduction in trading profits for a relevant basis period from that which would otherwise have reasonably been expected as a result of that reduced activity, capacity or demand."

(a) requires merely a reduction, in line with para 2. So that could mean any reduction at all.

(b) is the real crux of the matter. As well as a (any) reduction in activity, capacity or demand there also has to be a (belief in) a "significant" reduction of profits as a result of the reduced demand etc.

"Significant" is not defined. It is one of those words which judges say has to be interpreted in the context of, and in accorded e with the purse, of the legislation as a whiole.

Readers here may well know of examples of legislation where HMRC has indicated a more precise amount. 10% comes to mind for no apparent reason and without research. A possible pointer is that the maximum claim is £7,5k where profits are £50k, so 15% might be the figure. But in fact £7,5k max kicks in when profits are more than £37,500 which implies a reduction of 20%.

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Replying to richard thomas:
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By frankfx
25th Apr 2021 18:40

Thank you.

Methinks...

The man or woman on the Clapham Omnibus wouldn't have a reasonable chance at guessing "significant" reduction.

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Replying to frankfx:
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By richard thomas
25th Apr 2021 19:20

I agree. That makes HMRC ‘s loaded and undefined questions so awful. It is just intimidation.

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Replying to richard thomas:
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By Paul Crowley
25th Apr 2021 22:42

Much appreciated
So it is agreed
No idea what the rules are for SEISS V4
Just sort of less and a belief that the future is significantly less good than it should have been if covid was not with us,

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By fawltybasil2575
25th Apr 2021 22:24

@ jonharris999 (OP).

The use of the word “significant”, in the legislation, is of course unsatisfactorily subjective.

As I have said in other threads, one could interpret that word as implying a PROPORTION, eg 10% (of trading profits). BUT one could equally interpret it as implying an ABSOLUTE, eg £1000.

However, if one reads the GOV.UK guidance, determining “significant” is not, in the opinion of the government,
simply a case of selecting between the “proportionate” and the “absolute” (or even a hybrid of the two).

The GOV. UK guidance states that one should ALSO weigh the reduced income against the claimant’s other (presumably financial) circumstances (albeit again there is a lack of precision, hence whether one should consider the claimant’s overall net assets and/or their past/present income is not made clear).

If your client has correctly reported to you the wording of the claim form, the absence of “significant” and its replacement with the equally vague “a lot less” if anything muddies the waters even further.

I believe that HMRC’ s chances of success, in seeking to recover SEISS monies which they maintain have been claimed in error (and their seeking Penalties in relation thereto) are LOWER (than they would otherwise be) as a result of the vagueness of the legislation, compounded by vague GOV.UK guidance.

Indeed their chances (of success) are IMHO reduced further be their stating that the claimant should form their judgment (of whether the reduction is “significant”) based on the claimant’s circumstances.

I am compelled to however say, with respect to Mr. Thomas, that his use of the word “intimidation” (in his last post) substantially overstates the matter. HMRC’s wording on the claim form is certainly unnecessarily vague.

Whether one agrees my view that the wording of the legislation (and the wording of the claim form) would not assist HMRC in obtaining recovery of SEISS monies paid (and successfully imposing Penalties)
the use of the word “intimidation” is a substantial over-reaction.

Basil.

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Replying to fawltybasil2575:
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By Paul Crowley
25th Apr 2021 22:48

Vague unknown terms with threats of penalties applied to the 100% tax if tribunals
can ever figure out the true meaning does sound a bit threatening.
Not sure what my position would be were I to be self-employed, but I would feel stressed out trying to figure out the nebulous terms
Vengeance is mine sayeth HMRC

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Replying to fawltybasil2575:
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By johnjenkins
28th Apr 2021 11:19

Intimidation is spot on. By not defining, HMRC can pursue whoever they like hiding behind "but this is what we really meant" scenario. It will be interesting to see who gets the first case of "you shouldn't have claimed" and how it turns out.

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By jonharris999
26th Apr 2021 06:42

Thanks all for valuable contributions.

The early guidance for round 5 shows evidently that HMT/HMRC intend to circumvent these issues next time, and offers some thinking into what they might actually mean by words such as "significantly" or "badly"; but the light detail at the moment leaves further unknowns which I am confident we will discuss further in due course:

To what degree of accuracy will claimants have to report their 20/21 turnover, and how will they do this, some 5 months ahead (at least) of the statutory deadline for doing so?

To what will claimants be asked to compare reduced turnover - again to a parallel universe in which Covid didn't happen, or this time to a real earlier period, and if so, which one?

Given that a proportion of GCSE Maths entrants, (ahem) accountancy exam candidates and (ahem) many of the co Directors to whom I have (at some stage or other) presented reports, routinely err in calculating a % reduction, how are normal people to do this without a greater rate of error?

How many seas must a white dove sail? etc etc.

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Replying to jonharris999:
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By Homeworker
28th Apr 2021 12:52

Having a client with a 30th April year end, I would love to think that HMRC could look at the true turnover for the year to 5th April 2021, as her income has plummeted in the last year. However, the year to 30 April 2020 will form the basis of her tax return and her turnover for that year is too high for her to claim the 5th grant.
I have advised her to change her year end to 31 March and to include 23 months in the 2020/2021 tax return (a 12 plus an 11 month period), as the overlap relief will reduce her taxable income, but presumably the SEISS claim will then be based on the turnover for the whole 23 month, as I cannot see how they can separate the two periods?

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Replying to Homeworker:
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By lionofludesch
28th Apr 2021 13:05

Homeworker wrote:

I have advised her to change her year end to 31 March and to include 23 months in the 2020/2021 tax return (a 12 plus an 11 month period), as the overlap relief will reduce her taxable income, but presumably the SEISS claim will then be based on the turnover for the whole 23 month, as I cannot see how they can separate the two periods?

Every case is different but this is certainly something to consider.

As you can't submit accounts for 23 months, you can rest assured that HMRC will be able to see the difference between turnover in the year to April 2020 and the 11 months to March 2021

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Replying to lionofludesch:
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By Paul Crowley
28th Apr 2021 13:45

I do not believe there is an 18 month rule

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By Tax Dragon
26th Apr 2021 07:15

I see your £10 Paul and I'll raise you £20.

I bet (though I'm not a betting dragon) that, had the claim used the word "significantly" without further clarification (i.e. had it simply followed the law), Jon would have complained that there was no explanation as to what that meant. HMRC cannot win, whatever it does, on this forum. This is another example of this trait, IMHO.

A couple of points...

@Paul - you have interpreted "badly" to mean "adversely". I suggest that most people would realise it didn't mean that. "Badly" may well be a poor choice of word (to me it sounds like a colloquialism; colloquialisms are best avoided in official, national forms), but what it's trying to get at is that the damage is not insignificant.

"A lot less" is similar. If Paul has clients for whom £10 is a lot, then for them £10 would also be significant.

Of course the situation is unsatisfactory, but it's Parliament's job to pass laws. HMRC is on record as saying it regards 20% as "substantial" (another undefined, in some contexts, term). Parliament has now passed a law (or, at least, allowed law to come into existence) using a different word. Of course it would be helpful if HMRC provided guidance (in the absence of any statutory definition) on what it thought the word meant*. But suppose it had. And suppose that guidance had said "20%". I can imagine there would be howls of protest in this forum about HMRC's scare tactics and the overstepping of its authority - even though you all dismiss any guidance HMRC does give as being rubbish and would probably have done the same had HMRC come out and said "20%".

FWIW, "significant" and "substantial" may be synonymous. Or they may not be. I've no idea. But notice how the resident judge goes about interpreting the law.

* More accurately, at what point HMRC would consider raising enquiries. And that's your real complaint here - let's be honest. Not that HMRC hasn't "defined". More that it hasn't laid its cards on the table and told you what your clients can get away with. I'd suggest that businesses that had been badly, I mean, significantly, affected would know that, without any protestation about lack of clarity.

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By lionofludesch
26th Apr 2021 07:16

It's all ridiculously Wavy Mavis.

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By paul.benny
26th Apr 2021 08:11

I am not in public practice, nor am I eligible for SEISS personally, so for me this debate has only entertainment/interest value. It seems to me that the great majority of (successful) SEISS claimants will have made honest* claims and there were a minority of claims that abused the spirit of scheme*. As well as a few that are in a grey area* in between.

Covid won’t have turned honest traders into fraudsters. Suspected abusive claims are likely to form part of a pattern of behaviour by traders who are already potential targets for HMRC investigation.

There is a simple heuristic available here: if pre-covid profits/revenue are higher than those during covid, the claim is prima facie honest. Given the volume of claims (2.5m for the first round), HMRC clearly can only investigate a few. I rather think the OP may be being over-anxious or is scare-mongering.

(* Of course "honest", "abusing the spirit" and "grey area" are expressions that do not appear in the legislation)

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By jonharris999
26th Apr 2021 09:06

@dragon re what my complaint is and @paul benny re am I scaremongering (oh no - scarecrow [haircut] yes, scaremongering no) :

My complaint is not and has never been that HMRC might choose to challenge claimants and claimants might have to present evidence in support of their claims. No problem with that.

My complaint is, qv 99 other threads, that the legislation isn't clear or well-communicated; and that in consequence, claimants and some of their agents (scaremongering? plenty of evidence on this forum, and it's early days yet) will self-penalise; and that both sides are likely to make errors in considering and (when it comes to it) presenting evidence.

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Replying to jonharris999:
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By Tax Dragon
26th Apr 2021 09:22

jonharris999 wrote:

My complaint is...
1) that the legislation isn't clear or well-communicated;
2) in consequence, claimants... will self-penalise.

(Doctored quote, obviously.)

Re 1: new legislation seldom is. The reference above to the use of "substantial" without definition was supposed to be an(other) example of that - but, really, there are hundreds of such examples. (What is a "van"?) What happens - and will happen here is that the courts will eventually pass judgments against which other cases will be tested. (Though, as this is - hopefully - a one-off, passing, situation, how much gets tested and how many get taken to court are policy decisions [HMRC or government, I'm not sure] that may as yet be unmade. If it's going to be a largescale testing, I would think government will have to throw money at HMRC to enable that to happen.)

Re 2: Why are you complaining about that? Please describe your complaint more clearly, because I'm not getting it (and, having kind of said on another thread that I sort of agree with you, now I'm not so sure).

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Replying to Tax Dragon:
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By jonharris999
26th Apr 2021 12:00

Because it isn't fair. (And yes it's not the only or worst thing that isn't fair, but I never said it was.)

The system should be designed at every step to help the uncertain, not to trap the unwary. This seems to me to fall foul of that.

Perhaps it is true that it is unwise for anyone to attempt "self-" assessment, despite its name. Perhaps those who do not consult accountants must take their chances. But we have evidence, as I have said, on this forum, even in early days, that some accountants also appear to be unwarily trapped by the way this one has been set up.

And the subtle shift from "significantly reduced" to "a lot less" seems to me compound the unfairness. I feel (admittedly without evidence) that it's more subjective.

I agree with @Lion, and I also think that all Wavy Mavis-ing is unfair. (And I know it's not the only unfair thing or the worst unfair thing etc etc but that doesn't in itself mean I shouldn't grumble.)

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Replying to jonharris999:
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By Tax Dragon
26th Apr 2021 13:11

Let me suggest an alternative view. Putting hard-and-fast, mathematical measures in place may lead to greater certainty, but also to far greater unfairness. Look at the £50,000 cap.

If the law makes someone stop and think before s/he claims, why is that bad? And if it provides a mechanism for HMRC to claw back claims that it thinks were not justified, what's wrong with that? To some extent, there should be room discretion* on both sides. I'm actually pleased to see some such room return - the trend has been for legislators to become ever more prescriptive. (Because prescription appears "fair"... though, like the £50,000, it's not really.)

*Or judgment. (Subjective can be good.) But - this is now philosophical. My weakest suit. I'm out.

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Replying to jonharris999:
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By paul.benny
26th Apr 2021 09:36

Self-penalising/ self-excluding - Yes. We saw that also with CJRS and single-person companies where, for example some people thought that routine admin was work that would preclude eligibility.

On wording of both legislation and guidance... I don't disagree. But I'm not convinced it's any worse than any in other area. The difference is that in VAT, or income taxes or accounting standards, we collectively have years of experience of 'knowing' what the law is - only to struggle at times if we actually have to go back and check the legislation/standards.

I'll give you scaremongering. But maybe not over-thinking.

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Replying to jonharris999:
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By legerman
28th Apr 2021 11:06

jonharris999 wrote:

My complaint is, qv 99 other threads, that the legislation isn't clear or well-communicated; and that in consequence, claimants and some of their agents (scaremongering? plenty of evidence on this forum, and it's early days yet) will self-penalise; and that both sides are likely to make errors in considering and (when it comes to it) presenting evidence.

That's a danger, how many, who are borderline but possibly legitimate, simply roll over and accept the penalty. I will happily stick up for any of my clients, once I'm satisfied they were potentially right to claim, if this happens.

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By Mr_awol
26th Apr 2021 09:24

So they've dumbed it down - or perhaps the person that created the form wasn't the most verbose.

I'm not particularly excited TBH. They have taken one vague term and replaced it with another (possibly twice). Maybe it's more important than i am giving it credit for.

Is it Wednesday yet?

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By jonharris999
27th Apr 2021 06:27

For the record, I now have screenshots of both screens.

The first says: "To claim this grant, you must still be self-employed and coronavirus has badly affected your profits".

The second says: "Have you made a lot less profit due to coronavirus during this period?"

To make one grammatical error in a claim process may be regarded as a misfortune, but to make two...

Perhaps others will observe that I am scaremongering because these are not the only grammatical errors in HMRC's oeuvre, nor even the worst.

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Replying to jonharris999:
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By fawltybasil2575
27th Apr 2021 12:11

@ Jon.

You say (in relation to the screenshot):-

'The first says: "To claim this grant, you must still be self-employed and coronavirus has badly affected your profits".

The second says: "Have you made a lot less profit due to coronavirus during this period?"'

If, as I assume, you have included ALL the relevant CONDITIONS, then IMHO more important than the (as you rightly point out) grammatical ineptitude is the fact that those conditions are a woeful attempt at explaining the CORRECT eligibility conditions (ie the conditions in the all-important legislation). They are also, in part, conflict with the GOV.UK guidance.

As but one example, the SEISS 4 regulations stipulated (as did the SEISS 3 regulations) that one must take into account only Gross Income, increases in Expenditure being entirely irrelevant. The words "badly affected your profits" and "you made a lot less profit" indicate that a reduction in profits due solely to increases in Expenditure will render the claim potentially eligible - such is NOT correct.

One can have little sympathy for HMRC if SEISS claimants dispute a later attempt by HMRC (to recover some SEISS Grants) by taking advantage of the woeful wording at issue, notwithstanding HMRC's right to draw attention to the legislation itself and seeking to recover the SEISS monies by referring to that legislation).

Basil.

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By JD
28th Apr 2021 09:45

Is there an case that the Government in providing these scheme have sort some parity, with the furlough scheme. So whilst significant is not defined, there perhaps is an intention to restore the business owner to 80% of their normal income.

If you take that as read, then on this basis significant would need to be not less than 30% fall in profits.

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