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Fitness trainer must repay £4,549 of SEISS grants | accountingweb
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Fitness trainer must repay £4,549 of SEISS grants

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In the first tribunal case concerning eligibility for self-employed income support scheme grants, a fitness trainer who claimed Covid support after incorporating his business must repay those grants.

14th Oct 2022
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A fitness trainer, who incorporated his business in July 2018, then claimed Covid support under the self-employed income support scheme (SEISS) in 2020, must repay those grants.

This is the first case to reach the first tier tribunal (FTT) concerning the eligibility for SEISS grants, and the tribunal had no difficulty in finding for HMRC. However, there was some criticism of the on-screen instructions for claiming the SEISS grants, and HMRC’s checking procedures.

Fitness trainer business

Joshua Taylor incorporated his fitness trainer business as Coach JT Ltd on 31 July 2018 and ceased his self-employed business in the same month. This was reported on his 2018/19 tax return, which was filed online by Milton & Co on 18 September 2019. 

In May 2020 Taylor applied for the first SEISS grant (SEISS 1) and received a payment of £2,426 on 18 May 2020. In August 2020 Taylor applied for the second SEISS grant (SEISS 2) and received a payment of £2,123 on 24 August 2020.

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Replies (27)

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By Hugo Fair
14th Oct 2022 11:40

Don't whether it's more depressing or simply funny that a company whose "Nature of business (SIC) (is) 69201 - Accounting and auditing activities" can put forward the argument that the claimant “was an individual and carried on the same trade throughout the relevant period”.

The Tribunal Judge showed great self control when commenting that “the trade was conducted until 31 July 2018 .. as a sole trader and thereafter by his company. Those are two completely separate and different legal persons”!

Thanks (10)
Replying to Hugo Fair:
Lone Wolf
By Lone_Wolf
14th Oct 2022 16:52

I wish I could say I was surprised that someone holding themselves out as an accountant didn't appreciate the difference, but sadly I'm not. Depressing is definitely the word for it.

Thanks (3)
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By Paul Crowley
14th Oct 2022 15:04

Milton
That name appears on another pointless appeal very recently
Perhaps HMRC should ...........................

Thanks (3)
Replying to Paul Crowley:
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By richard thomas
16th Oct 2022 17:51

I came across Dr Milton when sitting as a judge. We did not get on, as after he lost the case (on car benefits IT & NICs) he accused me and the member of bias. What he is a doctor of I don't know - he has a string of dubious letters after his name, but it's not tax.

For a moderately exciting read see Couldwell Concrete Flooring Ltd v Revenue & Customs [2016] UKFTT 776 (TC) (the tax decision) & Couldwell Concrete Flooring Ltd (No.2) v Revenue & Customs [2017] UKFTT 085 (TC) (the bias decision). (The UT decided I wasn't biassed).

Thanks (6)
the sea otter
By memyself-eye
14th Oct 2022 17:54

For once I hope HMRC take this '[***]-head' to the preverbial cleaners.
'[***]-head' - Noun. An accounting term used to denote an individual of limited mental capacity advised by another individual with even less capacity. See also Dick H......
Oooh err -won't let me print 'door handle'...

Thanks (4)
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By jonharris999
17th Oct 2022 09:07

I'm still not aware of any single challenge by HMRC to any of the more subjective judgements required for SEISS eligibility (obviously this particular case is not such) eg, was it Covid that caused adverse effect, did claimant reasonably believe etc). Is anyone?

Thanks (2)
Jennifer Adams
By Jennifer Adams
17th Oct 2022 09:36

What is interesting about this case is the relatively low amount of overclaim....£4,550

HMRC obviously thought it was worth spending taxpayers money taking to Tribunal for this amount.

However, it was easy for HMRC to search out this taxpayer as their computer could see that it was obvious that he shouldnt have claimed. It could see that he'd gone from S/employed to Ltd.

HMRC won on this case and will therefore have precedent to reclaim in similar cases. I have already had one client who has been in similar circumstances, who (innocently) claimed and had to repay (unbeknown to me until I came to do the accounts!)

What will be interesting is whether their computer goes further and picks out those taxpayers who claimed but who carried on working and therefore probably should not have claimed as their income didnt suffer after all. I've not come across any claims from HMRC on such situations yet.

Thanks (1)
Replying to Jennifer Adams:
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By meadowsaw227
17th Oct 2022 09:51

Presumably if these individuals are represented then their accountants will pick up that they carried on working - a fairly easy thing to spot IMHO.

Thanks (1)
Replying to Jennifer Adams:
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By Paul Crowley
17th Oct 2022 10:48

A very early visit to FTT implies that this was spotted early and the agent refused to comply
Well done HMRC for taking a very obviously recalcitrant to FTT
How would your client feel if it turned out HMRC only interested in big figures?
This openly states that all incorrect claims will be pursued

Thanks (4)
Replying to Jennifer Adams:
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By Roland195
17th Oct 2022 11:03

But none of the iterations of the SEISS Grants required the Self Employed Individual to actually cease working in the same way that CVJRS did.

This forum has been tying itself in knots over the reduced income aspect since the grants were announced. There are obvious cases where it is clear but they are a minority in my experience.

Thanks (2)
Replying to Roland195:
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By jonharris999
18th Oct 2022 20:58

Depends on the sector/industry. Not at all a minority in many.

Thanks (0)
Replying to Jennifer Adams:
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By norstar
17th Oct 2022 11:13

Without being pedantic, FTT doesn't create a legally binding precedent.

However the case is so obviously an HMRC win that the facts do!

What should be happening is a simple data mining exercise for HMRC to look at any and all self-employed individuals who claimed SEISS but whose turnover increased during the period. Then look through those.

I was interested to see that this case involved an accountant because my first thought was that this is what HMRC gets when it sidelines professionals and encourages tradesmen etc to apply for grants themselves...

Thanks (5)
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By jamiea4f
17th Oct 2022 09:40

This whole scheme was massively flawed. My clients (in various businesses) were being sent letters advising them they were eligible to claim, so naturally some of them did, and because they could claim without going through me, most of the time I knew nothing about it... until in some cases the proverbial hit the fan. One client repaid his grants after I told him he wasn't eligible and was still receiving letters advising him that he could claim. Shambles isn't the word.

Thanks (15)
Replying to jamiea4f:
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By norstar
17th Oct 2022 11:15

Us too. Took on a client with the exact circumstance of this case and the ex-accountant told him he could claimed SEISS despite being a company. They never deregistered him for self employment either so HMRC didn't know.

Fortunately, he complied when we explained the position and he repaid everything.

That said, I'll never forgive Sunak for his deliberate punishment of company directors by excluding them from meaningful support in the same way as the self employed. Yet now they face 6% increased CT etc to pay for the COVID debacle.

Thanks (6)
Replying to norstar:
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By jamiea4f
17th Oct 2022 11:37

Yes all very well for judges, HMRC etc who no doubt were on full pay during this period to wave their fingers when they weren't the ones losing large chunks of their income to support the wholesale fraud going on at government level.... If you lost up to 90% of your income and were therefore pretty desperate, you'd be very tempted to claim when invited, whether you were ineligible or not.

Thanks (1)
Replying to norstar:
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By rememberscarborough
17th Oct 2022 14:53

There is only one reason why one and two man bands choose to operate through a limited company and that's to reduce their tax liability. If it cost more to trade as a limited company then virtually every one would revert back to sole trader status regardless of the increased risk.

If these people choose not to pay their fair share of NI etc why should the country have to support them? Perhaps they could have stored some of their extra income for a rainy day such as this?

Thanks (3)
Replying to rememberscarborough:
By tonyaustin
17th Oct 2022 16:01

There is another reason why "one and two man bands" operate as limited companies and that is because the companies they work for do not want the PAYE cost and the liabilities or responsibilities of employees' rights if they take them on as employees. Even so, the decision to take dividends instead of salary can only be because of tax and NIC and the SEISS rules were an unforeseen consequence of avoiding tax on previous income.

Thanks (1)
Replying to jamiea4f:
Chris M
By mr. mischief
17th Oct 2022 20:29

I too have a client who went DIY, didn't fully understand the rules and had to repay £30k or so which was a serious blow to him. HMRC were actively encouraging folk to block out their accountants the way they went about this.

Thanks (2)
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By Trevithicks_Piston
17th Oct 2022 10:02

Well hang on there! Still 3 more days to go before the further appeal period at para. 63 expires!

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By Eric T
17th Oct 2022 10:12

Hmm - I wonder how many clients use Dr Milton?

Thanks (1)
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By Mr J Andrews
17th Oct 2022 10:30

Clearly a case of Paradise Lost with this representation. But nothing new as far as criticism of HMRC's Online [ or any other ] guidance is concerned.

Thanks (1)
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By ds
17th Oct 2022 10:54

Low hanging fruit on this one - It's obvious the claim shouldn't have been made, I do not disagree. However there are still the untold millions, indeed billions of pounds fraudulently claimed in furlough and bounce back loans, and will never be investigated, challenged or recovered. It all depends on who you are and where you are.

Thanks (2)
Replying to ds:
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By ianmatt
18th Oct 2022 12:16

ds wrote:

Low hanging fruit on this one - It's obvious the claim shouldn't have been made, I do not disagree. However there are still the untold millions, indeed billions of pounds fraudulently claimed in furlough and bounce back loans, and will never be investigated, challenged or recovered. It all depends on who you are and where you are.

Yes easy targets as ever, fine if you persue hard targets as well. With these CV handouts I don't see it happening.

Thanks (0)
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By Hobrovian
17th Oct 2022 12:54

What would be the case, given the undertaking to continue the trade if in 2021-2022 the client who was always a sole trader then morphed into a Limited company carrying on the same trade?

She was entitled to the SEISS , promised to continue trading and did but then traded as a limited company carrying on exactly the same trade?

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Replying to Hobrovian:
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By Hugo Fair
17th Oct 2022 12:58

Oh come on ... as per the Tribunal Judge:
* “the trade was conducted until 31 July 2018 .. as a sole trader and thereafter by his company. Those are two completely separate and different legal persons”!

'She' cannot 'morph into a Limited company' ... they are totally different entities.

Thanks (2)
Replying to Hugo Fair:
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By Hobrovian
19th Oct 2022 10:28

the morph occurred subsequent to the grants being received. this is a regular occurrence for sole traders to ease into a limited company and indeed there are detailed procedures to do so including taking on assets subject to Capital Allowances.

it may be the tribunal would take the narrow interpretation of carrying on the trade but the words can imply the same carrying on but as a limited company.

Thanks (0)
Replying to Hugo Fair:
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By Hobrovian
19th Oct 2022 10:28

the morph occurred subsequent to the grants being received. this is a regular occurrence for sole traders to ease into a limited company and indeed there are detailed procedures to do so including taking on assets subject to Capital Allowances.

it may be the tribunal would take the narrow interpretation of carrying on the trade but the words can imply the same carrying on but as a limited company.

Thanks (0)