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SEISS 4th Grant ( Separate Accounting Years )

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Hi All

Totally lost , we have a 31/3 year end, thus 4th grant falls within two basis periods 5th Apr 21 and 5th Apr 22.
To be eligible we need to show that the impact from the qualifying period ( Feb - Apr ) causes a significant reduction in trading profits over one basis period

So , if we take 20/21 do we look at the downturn of Feb & Mar against that year or if we take a 21/22 forecast do we take Apr downturn and look at that ?

Any help would be appreciated

Thanks

Gandonas

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By SXGuy
03rd May 2021 06:55

Ignore basis period. Concentrate on tax year. Then re think your timings for eligibility.

Grants don't have anything to do with year ends, they apply to tax years.

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Replying to SXGuy:
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By GANDONAS
03rd May 2021 08:21

Hello SXGuy
Thanks, Im still not clear, the direction says "which the claimant reasonably believes will suffer a significant reduction in trading profits for a relevant basis period " and this grant falls between two basis periods. So if I use your suggestion of the tax year in which the grant is claimed, then fine BUT only one month of the qualifying period falls within that year, April. Question, regardless as our year end is the tax year would be.

Q. Do we only assess whether the downturn in April will cause the significant reduction in overall forecast profits for 21/22 , ie what happens to Feb / Mar ?

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By fawltybasil2575
03rd May 2021 10:14

@ GANDONAS (OP).

In your case, there are TWO questions to consider, ie:-

(1) For the period 1 February 2021 to 31 March 2021, DID (i) the reduction in trading profits (resulting from a reduced turnover, arising from coronavirus) have a ”significant” adverse effect on (ii) the trading profits for the year to 31 March 2021?

(2) For the period 1 April 2021 to 30 April 2021, do you reasonably EXPECT that (i) the reduction in trading profits (resulting from a reduced turnover, arising from coronavirus) will have a “significant” adverse effect on (ii) the trading profits for the year to 31 March 2022?

If the answer to EITHER (or both) of the above questions is “YES” then you are entitled to claim (assuming of course that you comply with the other requirements).

If you could kindly indicate the (where necessary, estimated) figures for (1)(i), (1)(ii), (2)(i) and (2)(ii), I shall give you my considered opinion on your eligibility.

Basil.

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Replying to fawltybasil2575:
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By GANDONAS
03rd May 2021 11:11

Hello fawltybasil2575

That is a very kind offer, most people I have spoken have just been pressing buttons and claiming the grant and have not considered the direction or available guidance. I will look at the impact of both and revert with figures. Thank you indeed as Ive been tying myself in knots over this.

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Replying to fawltybasil2575:
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By GANDONAS
03rd May 2021 17:05

Hello fawltybasil2575

Background and figures

Small licenced cafe and guest house with forecast net profits 20/21 of £26K
Adversely affected and claimed SEISS 1 & 2 , adjusted forecast to £13K
Reduced demand Nov 1st - Jan 29th ( - £2.7K ) adjusted year end forecast £10.3K, claimed SEISS 3

Reduced demand Feb 1st - March 31st (-£1.2K ) adjusting year end down to £9.1K , expect to meet SEISS 4 eligibility.

Forecast profits 21/22 £27.6K with reduced demand Apr 1st -Apr 30 (-3.3K) adjusting year end forecast down to £24.3K, expect to meet SEISS 4 eligibility.

Thanks you very much for your insight

Gandonas

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By fawltybasil2575
03rd May 2021 19:40

@ GANDONAS.

Thank you for reporting back.

Forgive me, but your figures do not enable me to determine whether you are eligible. Your figures effectively indicate the reduced profit, in relation to (at each STAGE) the PREVIOUS estimated profits.

Your estimated figure of £26K is fine, but I would need to know what the “profit reduction” figures are (for 1/2/21 to 31/3/31 and 1/4/21 to 30/4/21) ie the “shortfall” between (a) the estimated profits for those two periods AND (b) what the estimated profits for each of those two periods would have been if your business had not been adversely affected by coronavirus.

Given the nature of your business, I would be reasonably confident that you will qualify for SEISS 4, but your supplying to me the above requested figures will assist me in hopefully providing confirmation.

[If your business were one with broadly equal profits each month, then I could probably work out the above figures: but I suspect, from the nature of your business, a material seasonality element, which prevents my doing so].

I should mention that some commentators have assumed that, in determining whether the impact has been “significant”, one has to adopt the concept of proportionality. I disagree that such is necessarily the correct interpretation of the legislation (and of GOV.UK guidance). One could equally interpret the reduction in profits to be required to pass not the “PROPORTIONALITY” test but the “ABSOLUTE” test.

You have clearly already extracted some figures which will assist in the event (unlikely in your case) that HMRC seek to challenge your SEISS 4 claim (and indeed your SEISS 3 claim): after adding, to those figures, your responses to my above questions, I would recommend that you retain your WORKINGS, from which you have prepared all those figures, to thwart any HMRC challenge.

Basil.

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Replying to fawltybasil2575:
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By GANDONAS
04th May 2021 09:03

@fawltybasil2572

Ah, apologies, in both cases, Feb/ Mar & Apr the business was subject to tier level restrictions and was allowed to open 26/4. The estimate versus actual profit figures for the periods were as follows.

Feb 1 - March 31 Estimate £1,200 Actual £0
Apr 1 - Apr 30 Estimate £3,420 Actual £150

Thank you
Graham

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By fawltybasil2575
04th May 2021 10:59

@ GANDONAS

Thank you for your further post this morning.

Noting the “shortfall” of £3,270 (for the period 1 April 2021 to 30 April 2021), that figure representing 11.85% of the forecast profits of £27,600 (per your post at 17.05 yesterday) I would personally certainly regard your SEISS 4 claim as being valid (both in “proportionate” terms and in “absolute” terms).

In the interests of balance, different commentators have suggested that, in order to qualify under the “proportionate” principle, anything from 3% to 30% will be HMRC’s opinion of the correct benchmark – whilst the matter is of necessity subjective, I believe that 5% and £1,000 should be valid figures (under the “proportionate” and “absolute” principles respectively).

One can never discuss the possibility of HMRC’s challenging your claim, but IMHO any such challenge should be robustly resisted (and that you would “win the day” in the unlikely event that the matter had to be considered at the First-Tier Tribunal) .

Basil.

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Replying to fawltybasil2575:
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By Tax Dragon
04th May 2021 11:41

fawltybasil2575 wrote:

@ GANDONAS

I believe that 5% and £1,000 should be valid figures (under the “proportionate” and “absolute” principles respectively) ....and that you would “win the day” in the unlikely event that the matter had to be considered at the First-Tier Tribunal).

By way of full disclosure, a retired judge sometimes contributes to this forum. There was a thread (https://www.accountingweb.co.uk/any-answers/seiss-4-claims-wording-in-on...) in which he sets out his reasoning that the figure on the proportionate principle might be 20%. It's not unreasonable to suppose that a tribunal might follow similar reasoning.

What I'm puzzled by here is the question: what is the denominator? (This is of course your question, differently expressed.) Is it really right to (have to) take 24 months, as Basil seems to imply?! (Or have I misunderstood... again?)

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Replying to fawltybasil2575:
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By GANDONAS
04th May 2021 18:29

@fawltybasil2575

Thank you ever so much for this input, Ive spent hours trying to decipher the impact against the guidance and your comments are very helpful.
I believe SEISS 5 will be much more specific guidance with respect to quantification of loss. I often follow the forum regularly and in many cases find the information extremely valuable. Please accept my kindest thanks.

Thanks (1)
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By fawltybasil2575
04th May 2021 13:36

@ Tax Dragon

[1] “24 months”. To respond to your post, one has to consider (for the reasons I have outlined):-

(i) The year to 31 March 2021 profits [since the first two months of the quarter to 30 April 2021 (the SEISS 4 quarter) fall within that year], and also
(ii) The year to 31 March 2022 [since the third month of the quarter to 30 April 2021 falls within that year].

[2] Proportionality. With respect to the views of Mr Thomas, and his “possible pointer” (his post at 17.55 on 25 April 2021 in the thread to which you provided a link) I am reasonably sure that Mr Thomas did not intend his postulated “20%” to be interpreted as definitive.

I remain confident (whilst again caveating that view, as in my previous posts) that, at Tribunal, the SEISS 4 proposed claim would be upheld as valid. I would most certainly NOT recommend that he decides NOT to submit the SEISS 4 claim for fear of its being later challenged (since any attempt by HMRC to seek penalties, if not withdrawn, would IMHO be condemned at Tribunal).

Basil.

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By fawltybasil2575
04th May 2021 21:37

@ GANDONAS.

You are more than welcome (your 18.29 post refers).

I trust that your SEISS 4 claim is paid, and that no attempt is made by HMRC to challenge it.

As you rightly say, SEISS 5 should be more straightforward. Whilst the legislation itself is still awaited, the provisional information supplied thus far indicates that the claim will be based upon a comparison of 2019/20 and 2020/21 Turnover figures, and that (if there has been a decline of 30% therein) one will qualify for a Grant of 80% [of "average profits", albeit such term still to be determined].

From the figures supplied by you, your Turnover has declined by substantially more than 30%.

Time will tell whether the legislation accords with the information supplied. As you are probably aware, SEISS 5 is for the FIVE month period May 2021 to September 2021 inclusive; although the Grant will be calculated on the basis of only THREE months' profits (somewhat naughtily). The 30 September 2021 period end date was clearly chosen to align with the closing date for CJRS.

Basil.

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Replying to fawltybasil2575:
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By GANDONAS
06th May 2021 07:33

@fawltybasil2575

Thank you, rechecked all workings of profits and submitted. All records retained.

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