Hi all, im looking for some guidance.
Bearing in mind its not down to us, as accountants, to make claims i have a barber client whos turnover comparisons are down below 30%. more in the region of around 50%.
However since the 2nd stage of lockdown lifting (12th April 2021) his business has been trading.
The claim guidance states you :
- reasonably believe there will be a significant reduction in your trading profits due to the impact of COVID-19 between 1 May 2021 and 30 September 2021
I see many people on these boards mentioning about the 30% down in turnover but i don't see much mentioned on the guidance above.
In my opinion, being as the clients business has been trading since 12th April, its not significantly impacted by covid between 1st May 2021 and 30th September 2021?
Unless you argue the case that because of restricted holidays etc, people still being wary, then numbers may be down and as a result turnover too.
How would any of you advise this to be approached? Client seems to be pushing on the fact the comparative turnovers are down by way more than 30% but in my eyes thats not the only criteria (as above) but i don't see it mentioned much?
Thanks for any input
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There are the two separate elements to think about, are you affected and how much will you get. Your client isn't affected so shouldn't claim.
Except that many barbers/hairdressers aren't trading as normal - they can't have as many customers in a day as previously because of the need to sanitise chairs and equipment. And in some cases social distancing has meant they can't have as many people in the shop as previously.
But that doesn’t necessarily mean trading profits are “Significantly reduced” does it?
What if there is less demand but prices are increased? What qualifies as a “significant reduction” in profits ?
Do you not have any clients who claimed in Rounds 3 and 4? Or did none of them seek your advice? These questions are not new in Round 5.
Yes I’m fully aware of this, barbers were not allowed to open until the 12th April so were entitled to the 4th grant as they had very little work.
This 5th and the circumstances above are of difference.
I have the same with a barber client. They are having to reduce the number of people waiting in the shop and so are now using a booking app rather than having walk ins. The booking system allows enough time between customers to sanitise everything. They are certainly cutting fewer heads of hair each day but is the reduced turnover 'significant' enough?
Exactly, I wish more guidelines were give as to what is considered a “significant reduction” in profits.
I think I am going to advise that if the client genuinely believes their turnover is reduced, with no guidance as to what 'significant' is, then they probably have a good case to claim SEISS 5 but they would need to be able to back up their decision to make the claim and be prepared that if HMRC disagree with them that they will then need to pay it back.
What is to stop them waiting until the final week of September , then comparing 1st May-30th September in a normal trading year comparatively, then they will get a better grip of any shortfall in profits. I feel like this would be a more proactive way of assessing the situation
Precisely. A number of my clients are fretting about whether or not to claim and I am telling them to sit tight and see how the situation plays out. They can leave it until late-September, when things should be clearer for them.
Yes you are right, I have said that there is no rush and that they have until the end of September to make a claim. In my clients case he only started barbering late in the 18/19 tax year so comparing to previous years wouldn't be a good indicator as to whether his turnover is signifcantly reduced. Also the main question is whether his turnover is affected by Covid and therefore would have been significantly higher had it not been for Covid, now that is far more difficult to determine and prove.
Significantly reduced profit May to sept, not t/over. T/over reduction 19/20 vs 20/21 determines the amount.
Not quite:
* Significantly reduced activity, demand etc May-Sept; and
* Significantly reduced profit in any relevant basis period as a result.
I must respectfully disagree the views of recent eminent contributors (at 18.16 and 18.27) above, who advocate a “wait and see” approach (ie recommending that one postpone the claim until nearer 30 September 2021). The key lies in the wording from the Treasury Order, here:-
“4.3 Subject to paragraph 4.4, a claim may only be made for a SEISS 5 payment in respect of the period beginning with 1 May 2021 and ending with 30 September 2021 (“the qualifying period”) in relation to a trade-
(a) the business of which HAS (emphasis added) 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 (emphasis added) 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”.
My “capitalising” “HAS” and “REASONABLY BELIEVES WILL” is the key, ie this is a “dual test”, ie at the DATE OF THE CLAIM:-
(i) The reduction in “reduced activity” etc, from 1 May 2021 to the claim date, HAS occurred, and
(ii) One has a reasonable belief that such past reduction [ie per (i)] WILL result in a “significant” (such term undefined) reduction in profits for the basis period(s).
Therefore, if one submits a claim which complies with (i) and (ii) (one should keep a record of the grounds for such belief) at the EARLIEST opportunity, then (if it transpires that, for a reason or reasons not envisaged at the date of the claim, the trading profits are found NOT to have been reduced significantly, for the WHOLE PERIOD 1 May 2021 to 30 September 2021) then that claim remains VALID, and thus cannot be overturned by HMRC.
If, however, one adopts the “wait and see” approach recommended by the previous posters, then the claim towards 30 September 2021 would be INVALID if trading activity improved, after the claim date, to such a level that leg (ii) above would then not apply.
It of course follows from my above reasoning that if, at the date of the earliest possible claim, one does NOT have the “reasonable belief” per (ii) above (because one expects the future upturn in activity from that point to 30 September 2021 to result in no significant reduction in profits for the 1 May 2021 to 30 September 2021 period), then one should not of course submit the (invalid) claim at that date, but should review the eligibility criteria [per (i) and (ii)] intermittently; in the hope that at some future date one IS able to comply with those criteria. Hence of course also, the claim then would be valid, on the exact same grounds as I explained above (paragraph commencing “Therefore”).
I would add, in intending no offence, that I disagree the comment by Just so (18.09 post) of:-
" . . . if HMRC disagree with them that they will then need to pay it back",
[ie impliedly that if HMRC were to challenge any SEISS claim, one should automatically, “accept defeat”].
I entirely agree the OP’s view that, in some quarters, the requirements of 4.3 (as above) are overlooked as a result of too much emphasis being placed upon the “Turnover reduction” percentages factor (frankly, the “cliff edge”nature of those “30%/80%” rules is not the most sensible measure which could have been adopted by the Chancellor and his henchmen). Hairdressers are a good example of the need to consider all the "pros and cons" arising from the return to "near normal" from the middle of April 2021 - many will have valid claims (for the various reasons explained by several posters above) whereas others will not.
Basil.
Yes well I suppose it depends whether you genuinely believe that you will be impacted, if you are not 100% sure you could wait and see, and then be more sure if things change for the worse. Whether that is likely to happen or not is debatable, and in further support of Basil's argument the longer you wait and the better things are for you the less likely it is that you can support an argument for claiming.
In summary, the client has to make the decision and have a reasonable basis for that decision that can be backed up with some form of evidence or justification
Have you read this guidance? https://www.gov.uk/guidance/how-your-trading-conditions-affect-your-elig...
You stated that the turnover is down 50% in that period of Apr 20 to Mar 21 therefore they are allowed to claim the grant. Which they should receive the higher amount as it is above 30%. The period you are referring to only comes into play if the turnover actually increased:- which it hasn't?
Thats completely not how i view the criteria for the claim.
Yes turnover is down by 50% which qualifies on that stance, but does the client forsee a ''significant reduction in trading profits between 1st May 2021 to 30th September 2021'' that is the other criteria needed.
As stated in HMRC's email:-
How does turnover change the grant amount I’m eligible for?
If your turnover was down by 30% or more in 2020 to 2021, you will receive a grant worth 80% of 3 months’ average trading profits (capped at £7,500). If your turnover was down by less than 30%, you will receive a grant worth 30% of 3 months’ average trading profits (capped at £2,850).
If your turnover increased, you may still qualify for the 30% grant. You’ll still need to reasonably believe that, due to reduced demand or inability to trade between 1 May and 30 September 2021, you will suffer a significant reduction in trading profits.
And you're happy to base a decision on a generic HMRC email?!?
FWIW the give-away in that email is the phrase "You'll still need to reasonably believe that ..." in 3rd para - note the word 'still'.
In other words the words that follow are a repeat of the condition (although not directly stated here) that also applies to the 2nd para of email.
I am happy to base it on the fact that the calculation of the turnover is over the period Mar 20 and Apr 21, this in then measured against the client's previous year's figures for either 19/20 or 18/19. Which then calculates out as "more in the region of 50%".
If you want to now include a further parameter of the period of 1st May to 30th September where trade has been affected, I would suggest that as "Freedom day" was not until this month and that is only for England, that barber's/hairdresser's/beauty salons would still be severely affected due to covid restrictions due to not being able to have customers waiting/cleaning areas between customers/social distancing so therefor their trade is being restricted.
As the op was referring to a barber's and all they stated was they were trading from April 12th, I would say that they would be entitled to claim
