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SEISS - 'Adversely affected'

Interaction with other grants

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A client whose business has clearly been significantly disrupted by the coronavirus outbreak has claimed the initial SEISS grant and, depending how things go after 14 July, may well claim the second instalment.

I now discover that, earlier on, the client was in receipt of £10000 from the local authority - being subject to small business rate relief on the business property.

My question is whether the receipt of this grant should come into the consideration/calculation of 'adversely affected'.  The description of adversely affected in the original SEISS instructions on the HMRC website (or the examples added on 12 June) makes no mention of earlier grants and the guidance for the second SEISS grant simply specifies that the business should be adversely affected after 14 July - which seems to discount consideration of the much earlier £10000 grant altogether.

Any thoughts?

Replies (11)

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By Wanderer
19th Jun 2020 08:43

Quote:

My question is whether the receipt of this grant should come into the consideration/calculation of 'adversely affected'. 

No.
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By NH
19th Jun 2020 16:48

each person has to decide that for themselves, but for me personally a definition of adversely affected is - would I have reasonably have expected to make more or less profit than I have done had the virus not hit, and remember that any grants are taxable income.
I realise this is an over simplification but if for example I consistently make 3k a month profit, and I have had zero income for 3 months but got the 10k grant I have not been adversely affected.
There might also be case of not being affected for SEISS 1 but I might be for SEISS 2, for example if I am still unable to trade.
It is certainly a minefield, but I expect that HMRC will have little motivation in pursuing this except in a blatant case.

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Replying to NH:
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By Paul Crowley
19th Jun 2020 19:49

I agree with HMRC conpliance issue in particular. What would be a tribunal's view of adversley affected? Noone knows so likelihood would be to go for easy targets. Is there anyone who considers they have not been adversley affected? Clients make the decision. The other questions are specific and easily demonstrated, Those are the the targets I would aim at were I the one tasked to recover taxpayers money. I have a company so not part of the process. But I definitely have been adversley affected.

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Replying to NH:
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By bernard michael
20th Jun 2020 09:08

Quote:

each person has to decide that for themselves, but for me personally a definition of adversely affected is - would I have reasonably have expected to make more or less profit than I have done had the virus not hit, and remember that any grants are taxable income.
I realise this is an over simplification but if for example I consistently make 3k a month profit, and I have had zero income for 3 months but got the 10k grant I have not been adversely affected.
There might also be case of not being affected for SEISS 1 but I might be for SEISS 2, for example if I am still unable to trade.
It is certainly a minefield, but I expect that HMRC will have little motivation in pursuing this except in a blatant case.

Particularly as there will be millions of cases

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By fawltybasil2575
19th Jun 2020 22:27

A reasonable interpretation of “adversely affected” must take account of ALL the effects of CV, in the period at issue (ie factors which increase the overall net income and those which reduce the overall net income).

Hence, if one has received a grant of £10K in a SEISS period, and that grant has exceeded the “NET” effect of other CV factors, then certainly one is not entitled to claim.

Take each case (ie SEISS 1 and SEISS 2) separately, so the £10K grant received in SEISS 1 has no impact on the validity of the SEISS 2 claim.

One is strongly advised to keep a record of those factors which have adversely affected the net income in the SEISS period.

I have no doubt that HMRC are already considering what factors to take into account when they in due course investigate possible incorrect claims (almost certainly upon receiving 2020/21, and then 2021/22, Tax Returns). Given the difficulty in differentiating “CV“ factors from “non-CV” factors, I would expect
their “targetting” (i) specific types of business where the likely CV impact is low, and (ii) “high end” claims.

Basil.

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Replying to fawltybasil2575:
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By Matrix
19th Jun 2020 23:54

With all due respect, you are making it up. If it was necessary to consider other grants etc then this should have been prescribed in the rules. I don’t know what you mean by ii) high end claims given the amounts were calculated by HMRC.

I do, however, agree with i) but believe that SEISS2 (and CJRS2) should have only been for hospitality, travel, hairdressers etc.

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By fawltybasil2575
20th Jun 2020 00:26

@ Matrix.

(1) Where, as in this case, the guidance refers in non-specific terms to a business having been “adversely affected” then, by simple definition, in calculating whether such “adverse effect” has arisen, one must take account of ALL factors.

Hence, there is no requirement to specify, in the “rules”, one of those factors, ie the grant of £10,000: there being likewise no requirement to specify any of the numerous OTHER possible factors which, taken together, one must aggregate to determine whether there has been an overall net adverse effect.

(2) My expression “high end” claims simply meant claims at the “high end” of the range of claims (ie, in relation to SEISS 1, claims relatively close to the £7,500 maximum - I am sorry if my use of that expression was unclear).

Basil.

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Replying to fawltybasil2575:
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By Matrix
20th Jun 2020 00:50

Please advise where it says that you have to calculate whether you have been adversely affected.

So you would have advised my client not to claim per this question I asked a few months ago?

https://www.accountingweb.co.uk/any-answers/advising-a-client-re-seiss

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Replying to Matrix:
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By fawltybasil2575
20th Jun 2020 02:47

@ Matrix.

As has been stated previously and elsewhere on this site, and in other places, there is no definition of how “adversely affected” should be interpreted.

In (say) 95% of cases, one will be able to carry out (albeit it will not always be easy) an exercise to determine whether the business has been adversely affected for the period of the SEISS claim - there could however be circumstances where simply looking at the SEISS period will give an incomplete (and thus inaccurate) picture of whether the business has been adversely affected.

Indeed, just such a case is the one to which you have provided a link. In that case, clearly the longer-term financial loss from the closure of the business will have substantially outweighed the short-term “gain”. I would thus, for the avoidance of doubt, NOT have advised your client not to claim the SEISS Grant.

Having referred above to the “(say) 95% of cases”, your case comes within the remaining “5%”. One can envisage other scenarios where one could put forward a valid argument (with which HMRC might disagree) for a claim being valid, for example where a business will need to use part of the £10,000 Grant to fund Rents payable beyond the SEISS period, such Rents exceeding the “surplus” from the SEISS period.

Of course, one should not forget that often the £10,000 Grant will be largely effectively offset by Rents payable (or Mortgage Interest) on business premises, and on those grounds alone one could realistically argue that it would be incongruous to disregard the Grant when one rightly took account of the Rents payable which the Grant is partly financing.

One COULD, as explained above, sometimes put forward grounds (not necessarily successfully in the event of dispute by HMRC) for disregarding the pure short-term calculation: but such occasions would be in the distinct minority.

In reaffirming my views, I of course respect your contrary opinion.

Basil.

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Replying to fawltybasil2575:
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By Paul Crowley
20th Jun 2020 05:26

Concur all
(2)
HMRC would not waste time on small claims given limited resources.
There are so many claims

Similarly cannot believe HMRC would waste resources looking into CJRS on sole directors no other employees

in effect you know your a from your e

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