Share this content

Will HMRC crack down on SEISS ?

SEISS grants were clearly widely overclaimed but what will happen?

Didn't find your answer?

SEISS, the big elephant in the room?

Considering there were no real checks for the grants especially the first 3. They were clearly over subscribed whether willfully or carelessly. Considering HMRC now has 5/4/21 tax returns will they go back and demand repayments of the first 3 grants? 

Such as grant receivers that have increased profits in general and particularly taxpayers HMRC have in year information for VAT, PAYE, CIS etc. Where with this information it would be clear when they were trading and an objective measure of trade reduction? 

Seems like at the moment that the focus is on SEISS overclaimaints who broke specific aspects, I.e. stopped trading, did not file, amending previous tax returns etc. Will they drill down and actually investigate the details of wrongful claimants? or will they avoid the inevitable semantic defences borne of the vague and subjective declarations of the initial claims? 

 

Genuinely interested is 5/4/21 and the first 3 grants now matter for history and over-inflated payments on account? What dies this mean for 5/4/22 and the 4th and 5th SEISS?

Replies (19)

Please login or register to join the discussion.

avatar
By Tax Dragon
29th Apr 2022 00:18

It's part of the genius of making it a tax charge... gives them readymade powers of enquiry, discovery, etc.

Thanks (1)
Replying to Tax Dragon:
avatar
By jaded
03rd May 2022 18:55

A very good point!

Thanks (0)
avatar
By DKB-Sheffield
29th Apr 2022 00:35

The clear answer to the headline question is that nobody knows (well, maybe the higher echelons of HMRC may but, again, maybe not).

The big issue is clearly to determine *how* the grants were wrongfully claimed.

ALL of the grants had an element of subjectivity insofar as the claimant had to make reasonable assumptions of the future impact of COVID-19.

ALL of the grant criteria were sufficiently woolly to prompt many questions (including in here).

ALL of the grants relied on claimants being honest, truthful, and genuine.

The first and second grants were almost complete giveaways (Have you had to buy PPE etc.?). By grant 3, we were heading into lockdowns 2 and 3 which was still in place for grant 4! The only other grant (5) was at a time of rapidly rising cases and a lot of uncertainty!

Clearly, businesses could have forecast better, and may not have claimed the grants. However, forecasting with the uncertainty of the past 2 years is beyond the ability of some of the best business analysts, let alone Jo(e) Public the nail technician!

I see where you are coming from regarding using information at hand.

- VAT would give an understanding of levels of trade to an extent but, there are clear timing issues. Besides hospitality saw a huge uptick in August 2020 (EOTHO) suggesting a normal (or increased) trading level - albeit VERY short-lived

- CIS depends on the perspective. From the contractor's perspective this may prove ongoing activity. From the subby perspective HMRC are so backward in marrying up deductions to subby tax accounts that it's almost impossible to see them utilise this long untapped resource!

- PAYE wouldn't be easy! Many employers were paying furloughed employees and claiming CJRS (or just paying them to not work). On the flip side, where self-employed workers took on part time (or full time) work, this in itself did not usually invalidate an SEISS claim

Unfortunately, the way I see it, and unless there is compelling evidence to suggest wrongfully claiming a grant (e.g. ceasing trade), it is now very difficult to police a system that was based on very loose criteria. I think the approach will be, as it often is with HMRC, to pick the low-hanging fruit. If something is obviously amiss, it's worth a punt. If it's borderline, or low value, it's possibly not worth the hassle!

However, only time will tell!

Thanks (1)
avatar
By sanjay100
02nd May 2022 18:25

There are far too many cases. I bet 95% of those in construction claimed all 5 grants even though they were working virtually all the way through apart from during the first lockdown. I keep hearing my mate said I can claim or everyone else was claiming so why can't I.

HMRC do not have the resources and each case would take so much time to resolve. Overclaim where intentionally or unintentionally is rife on furlough, bounceback loans, Council grants, eat out to help out . Its just quite depressing when business owners benefited and everyone else will have to pay for it.

Thanks (1)
Replying to sanjay100:
avatar
By Tax Dragon
03rd May 2022 06:02

It's not difficult to open an enquiry and ask for the records the claimant kept at the time of the claim.

That said, HMRC's current ability to do things that are not difficult is hardly awe-inspiring.

Thanks (1)
Replying to Tax Dragon:
avatar
By Hugo Fair
03rd May 2022 10:01

So far they seem keener on using 'nudge letters' to request confirmation from the taxpayer (that correct records were maintained + that these have been reviewed + found to be OK).
The 'advantage' of this to them is twofold - a) it involves no effort by HMRC, and b) they still retain up their sleeve the option (threat) of opening an enquiry.
Of course the downside is that the letters are untargeted, so a substantial number of 'innocents' are caused unnecessary extra work or costs - but that doesn't affect HMRC.
In other words, it's not their ability to do things that are not difficult ... it's their lack of desire to do anything that looks like avoidable work (for them).

Thanks (1)
Replying to Hugo Fair:
avatar
By Tax Dragon
03rd May 2022 15:46

Interesting. You will no doubt know that ICAEW asked HMRC to make it policy not to send nudge letters to represented taxpayers. From what you are saying (mention of extra costs), no such policy exists in relation to SEISS.

Though, to be honest, based on many contributors' comments on many an SEISS discussion in this forum, many otherwise represented taxpayers are unrepresented when it comes to SEISS - accountants (not all; many) don't see it as their job to "get involved".

Thanks (2)
Replying to Tax Dragon:
avatar
By More unearned luck
04th May 2022 17:56

I suppose, the not-get-involved attitude stems from HMRC's decision to shut agents out of the claiming process. But any such attitude is untenable as SEISS goes in one of two boxes on the tax return (the correctly claimed box or the incorrectly claimed box) and an agent can't fill in a return for a client without discussing with the client which box is appropriate, at least in marginal cases and definitely in the cases where profits are higher than before although the true comparison is with what would have been but for the virus and the countermeasures taken against it.

Thanks (0)
Replying to Tax Dragon:
avatar
By DKB-Sheffield
04th May 2022 19:44

I'm certainly not in the camp of this being outside our remit and I apologise if that was how my post came across! Of course it is within our remit - not just for HMRC's ends, not just to uphold the various laws, but to protect our clients from wrongdoing - and subsequent actions!

I was also actively involved in advising on claims for all clients, and was further informed of (and reviewed) claims being made before submission - for all but a handful. Even then, I wouldn't like to state categorically - and with the benefit of hindsight - that all clients were impacted equally, or even as badly, by COVID 19 as was initially expected in May or July 2020.

Some clients who received the earlier grants, whilst significantly underperforming on the previous year's 'trading' figures, saw total profits increase by up to 50% of the grant value (once SEISS, LA Grants etc. were added in)! My gut says this is wrong but, is it also ethically right to demand a client pay back the grants - to satisfy my (potentially poor) judgement? It was not - afterall - incorrectly claimed at the time, the client was adversely impacted, but it transpires that the client was not in a loss-making (or even breakeven) position at the year end.

The key issue I have is, HOW we can effectively and retrospectively 'police' the grants, without making (clouded) judgements now we have the benefit of knowing 2 years worth of figures? Whilst some may be cut and dried (e.g. an Amazon delivery driver was probably positively affected) others are not so simple (e.g. a restaurant who, after all the grants provided - £30K+ LA grants in many cases - EOTHO's bumper August, offering some 'takeaway' services, significantly lower costs etc.. actually made profits). It's easy to question, not so easy to justify that a client *knew* their business wouldn't be adversely affected (in the long run).

The simplest option... anyone who made a profit for the year (excl the grant) should pay back the grant... partially, or wholly... is not, to the best of my knowledge (and I will happily be corrected), being mandated (or even suggested). Maybe it should?! However that profit may have occurred in Q3 or Q4, where only grants 1 & 2 were claimed. The 3-year average may have been considerable lower due to poor year 1 & 2 figures, with the 3rd year having profits 2 or 3 times the grant payment. Or, simply, the client may have 'believed' (in July 2020) that the electric shock impact in Q1 and Q2 wouldn't subside, nor that their business would outperform historical trading levels in Q3 and Q4, and claimed Grant 2 accordingly.

My bug-bear from day 1... there was far too little in the way of quantitive guidance issued at the time. Indeed, until SEISS5, the grants were pretty much 'all or nothing' so, a claimant making a 'COVID-related loss' or 'COVID-related downturn' for a quarter of £3,000 was equally entitled to claim the full grant of (up to) £7,500, as one making a £30K loss. That lack of quantitive guidance makes the ability to take enforcement action over the - largely subjective - opinions of the claimants very difficult. Hindsight is almost certain to obscure the process... e.g. Pub client. In July 2020 they expected the business was suffering. In August 2020 they made a £15K profit! Do we (or HMRC) say the client should have expected this profit... even though they didn't know the impact of EOTHO?! Hindsight says 'yes' but, it's possibly not a true reflection on the client's views in July 2020!

Unfortunately, we can only do so much to police this... and it will have to be US that police it for represented taxpayers. Unrepresented taxpayers will likely get away with it! The idea that HMRC can magically target businesses they *know* to have incorrectly claimed grants... based on largely annualised, solely quantitive data... is pretty much a pipe dream. It'll have to be 'target everyone, and hope enough of the more honest souls pay up'. Alas, it will also probably be those that have done no wrong that will rush for their wallets when they receive the letter from HMRC!

Thanks (0)
Replying to DKB-Sheffield:
avatar
By DKB-Sheffield
04th May 2022 21:14

On an additional tack... and on annualised figures, losses incurred in Q1 and Q2 lockdowns may significantly subdue profits for the year. It would therefore be incorrect for HMRC (or others) to use those annualised figures - alone -to assume that grants were correctly claimed! A taxpayer sustaining incremental losses for the year of £10K may have been equally as *UNqualified* to claim one or more grants, as another making an incremental £10K annual profit was *qualified* for claiming one or more. It's highly unlikely HMRC would automatically check the loss-making business over the profit-making one though!

Thanks (0)
Replying to DKB-Sheffield:
avatar
By Tax Dragon
05th May 2022 06:31

I didn't mean you. This isn't the first thread on this topic. Who knew?

Thanks (1)
avatar
By Michael Davies
03rd May 2022 10:22

Excuse my vagueness on this but I am only two tax returns in for 2021/22.There is a question on the HMRC return which asks if you have over claimed ? Tick yes,and presumably sometime this century HMRC will open a case against the taxpayer.Option 2,do not tick the box,and should HMRC accidentally stumble across over claims ; then presumably heavy fines etc will be imposed.
Surely some algorithm could pick up all the over claims ?The software development costs would be insignificant in comparison to the claw back and penalties imposed ?

Thanks (1)
Replying to Michael Davies:
avatar
By More unearned luck
06th May 2022 14:27

Self assessment is called self assessment as taxpayers self assess their tax liability. This means that taxpayers must decide for themselves (with guidance from their accountant, I hope) whether any coronavirus support payments including SEISS have been incorrectly claimed.

If you are referring to box 20.1 on page TR8 then it doesn't matter if it is ticked or unticked as it is merely a nudge and I doubt that it is information that is 'reasonably required' - it merely duplicates the declaration of truth.

If any grant has been incorrectly claimed then the taxpayer should be volunteering entries in the second box 1 or the second box 2 or both on page TR5. You don't wait for HMRC to 'open a case'.

How could an algorithm assess what profit the taxpayer would have made if there had been no virus? For the later SEISS grants how would it measure 'significant' or whatever the criterion was? It could pick up the cases where profits have increased compared to an earlier period and therefore might be worthy of investigation. I doubt any algorithm could identify all the 'over claims'.

Thanks (0)
My photo
By Matrix
04th May 2022 19:59

How much are you all charging to police this?!

Thanks (1)
Replying to Matrix:
avatar
By Tax Dragon
05th May 2022 06:21

Police? You believe too much of the rubbish that you've read in here.

Contrast MUL's measured comment, with which I agree.

But on your fees point... if you do nothing on this (ie don't do your job) why should an insurer pay your fees when the nudge letter comes/enquiry arises?

Thanks (0)
Jennifer Adams
By Jennifer Adams
07th May 2022 13:20

The problem here is.. will clients agree that they have over claimed and agree to the box being ticked??

As indicated on other Any Answers (not this link) and as Sanjay says we all have clients who worked through the lockdown and also claimed the grant (s).
..'All gone..I bought a hot tub with mine'.. is what one of my (subbie) clients proudly told me when I told him that his gross income was higher than previous years and he should repay.

Then they complain when they are taxed on it and you get 'my mate received more tax refund but claimed the same as I did for SEISS'.

We are not policemen /women and it puts us in a difficult position when we can clearly see that clients shouldnt have claimed or should repay.

TAxDragon is right - all we can do is advise client and make sure that we make a note somewhere (email) confirming our advice. If they get caught then you can take great delight in saying 'I told you so'.

Or.. if you feel strongly about it then dump the client.

Thanks (1)
Replying to Jennifer Adams:
avatar
By DKB-Sheffield
07th May 2022 14:37

Firstly, I accept my comments on 'policing this were' wrong insofar as the words 'police', 'policing' etc. are entirely the wrong phrases to use. Those words are far too strong. They suggest a requirement to investigate, pursue, and present a case for prosecution - which is not what I meant!

However, at the same time, knowingly submitting a false return (whether signed by a client or not), completely ignoring and / or failing to advise a client of potential wrong-doing, or effectively facilitating (or being party to) the covering up of erroneous claims would have consequences. Whether the consequences are penalties, interest, failure to report under MLR, or client neglience claims, this will be situation-specific.

As with any 'tax' matter, there are grey areas. The issue is, therefore, when does an SEISS claim become 'black and white'. When does it become clear that a claim was wrongfully made? I don't have an answer.

There is no definitive retrosopective test that proves Jo(e) Plumber 'knew' he would not believe his business was adversely impacted by COVID in May 2020, any more than there is an absolute assurance that Sammy Pizza's drop in business in November 2021 was as a *direct* result of COVID.

The one definitive is that, if a client claimed a grant knowing they were not entitled to it (e.g. Mick/ Michelle MOT claimed Grant 3 - despite them being busier than ever before due to the COVID MOT extension, or Charlie Courier claimed Grant 4 - whilst having more trade due to lockdown), particularly if they tell us the did, any attempt to cover that up (by client), and any attempt to facilitate that cover-up (by us) - or not report under MLR if relevant, could be serious! To my mind, completely ignoring the clear 'red flag' clients is incorrect.

The biggest issue in my mind is - at what stage do the 'grey area clients' become 'black and white clients', and to what extent should we be able apply the 'subjective' parts of the guidelines/ legislation? Client may have believed they would be impacted adversely in Jul 2020 (certainly that's what they say they believed), yet hindsight (i.e. Q/E 08/20) suggests they weren't... is applying hindsight the same as saying the grant was initially claimed in error? If so, could hindsight also suggest the guidance on claiming (in the first place) should have been better worded?

The one certainty... the question of 'should have - shouldn't have' is going to rattle around for a few years yet. No answers will be known until cases start being tested at tribunal.

Thanks (0)
avatar
By jaded
08th May 2022 19:36

Fascinating debate. What if though accountants do investigate their clients SEISS claims, somehow plough their way through all the grey area and inform clients to repay. They then do repay, then it transpires that accountants have viewed matters in a different way to HMRC and they never would have sought repayment. Further that a tribunal or court rules one way and interprets differently to said accountant, what then? Whole process would be considerably easier with clear guidance or precedent.

Thanks (0)
Replying to jaded:
avatar
By DKB-Sheffield
08th May 2022 23:17

These are, of course, very good points - and one that I don't believe anyone knows the definitive answer to!

The grey area is the one that bothers me most - not because there wasn't any guidance, but because much of the guidance was subjective. This is where I feel I have been quite specific in stating "I don't have the answer".

However, where claims were clearly wrongfully claimed (i.e. where the subjective part of the claim is effectively overruled by the facts - at the time of that claim), they do not, to my mind fall into the "grey area" (my reference to MOTs being a significant case in point - there are many others). We should not simply ignore it because "we were not allowed to be involved in the claim process*", or because "everyone else is ignoring it".

Now, I will certainly not be advising all clients who made a claim to repay, any more than I will be agreeing to 'cover up' erroneous claims (but then, I know and have documented, the reasons for the vast majority of my client's claims having done a lot of (no-fee), hand-holding at the time).

What I will proffer is, that where a taxpayer has clearly wrongfully (or even fraudulently) claimed SEISS, I am sure there will be few circumstances under which HMRC would "never have sought repayment".

* Incidentally, we (as agents) were not allowed to submit a claim fo SEISS. We were certainly not forbidden from having any role in the claims process!

Thanks (0)
Share this content