Beauty therapist claimed under wrong Covid scheme
A beauty therapist’s confusion over her employment status led to her mistakenly claiming self-employed income support during Covid. The first tier tribunal favoured HMRC leaving her with no foundation for her claim.
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'According to her evidence, Lorenzo did not understand the effect of incorporation and continued believing she was self-employed. Although she was now being paid via payroll and receiving payslips, she did not realise that her employment status had changed.'
Do not believe a word of this, or the accountant was not good at explaining the basics.
I would be interested to know who was doing the wages submissions.
HMRC sent her the application and she should have read the rules. We all had clients calling asking whether they could claim, despite having ceased self-employment. All she needed to do was take advice.
Had she ever previously been employed and received payslips?
If she had not dumped the accountant, then the accountant could have given her the advice she needed. My guess is that she just stopped paying him the monthly fee.
There are some clients who really, really don’t understand (and sometimes don’t attempt to understand) the difference between being self-employed and being employed by their own company.
We had a similar case where a chap claimed SEISS. He later said he claimed because all his mates were, and as he was doing the same work, assumed he should too. So totally ignored our emails telling him that SEISS did not apply to him anymore (but replied quickly enough when asked about furlough) and we only found out about it when HMRC asked for the SEISS monies to be repaid.
I agree. Some of our clients have said that they are self-employed even though they are Directors/owners of limited companies. During Covid one client told my I was wrong when I advised him that he was not self-employed. He eventually got it.
It is good to read that this government is at least attempting to address the false claims though whether it will achieve anything is another matter.
'With Rachel Reeves set to appoint a covid corruption tsar imminently we can expect a flurry of similar cases hitting the FTT in the coming months.'
If there are such cases left in the system, then HMRC really are not up to the task.
Ye 2020 tax returns should have been the trigger. That is three and a half years ago.
'Beauty therapist claimed under wrong Covid scheme'
No she was not entitled to either.
She needed to claim universal credit
Have you changed the title? Did it have a make up theme originally?
she should have received some sort of support. it's the less well off people being trod on yet again . perhaps she should sue her accountant. and as far RR intention to appoint a Covid Tsar I do hope they focus on the large scale abusers.
She thought she was self employed. That appears to be the accountant's fault?
He did not make the claim, she did.
Did she ask the accountant for help?
If she had made the 'correct' claim that also would have been incorrect according to the article.
She could have claimed both Universal Credit and a bounce back loan, but the dividend would have interfered with the UC Claim
If she rented a building then there would have been loads of grants. That is unknown.
there is a pattern emerging here - government short of revenue, HMRC freed from managing (processing) Covid claims (whether SE or PAYE) and with new resources to pursue those who got it wrong - at lets face it, most did get it wrong. Look at the IR35 cases now going through tribunals and those were pre covid.
Rishi Sunak's way too generous lock down payments were always going to backfire.
I dispute that these were over generous they were vital to so many people and labour would probably have paid the same. I'm sure the treasury had plans for an epidemic even if NHS didn't
Nope ... Treasury had no such plans. All the main schemes CJRS, SEISS, BBLS (let alone Eat Out etc) were plucked out of the ether and rushed out there without any detailed evaluation or consideration of operating/controlling them.
That's probably understandable (although not learning lessons as the pandemic progressed was less so), but there's no point pretending they had proper plans on the shelf.
80% of salary for staying at home with no travel or clothing costs - I call that overgenerous. Small wonder so many don't want to work now.
As for 'Bounce Back' loans - what a gift to ne'er do wells across the land.!
80% of salary meant more than 80% of net, with no way of spending the money travelling, eating out, theatres or clubs, ad infinitem
The money was just sitting around burning a hole in the employee pocket.
Self employed could both work and claim, so could be on 150% of normal income.
A one man company could borrow £50,000, take it out and walk away liability free.
Stupidly overgenerous.
It wasn't just "Self employed (who) could both work and claim" ...
... Employees receiving CJRS from 'regular' employer were allowed to take on a 2nd job with a different employer (working for them during the time for which they were being furloughed by the first employer)!
I had forgotten out that loophole.
One of the PAYE schemes we did had an increase in employees, and overtime dropped to zero. It was a care home.
Interesting to think back to how much time we spent on here minutely analysing those questions about "reasonable belief" of harm to a business.....4 years on, not a single challenge to any claim on those grounds, so far as I am aware.
The amount of time I spent was ridiculous. I did all the CJRS stuff.
Lots of amendments to PAYE clients claims, the joy of finding out that my staff had NOT claimed EA.
Some directors dont understand the difference between self employment and incorporation despite being advised many times by their accountants.
I had a client who was a landlord who rang HMRC, told them he worked for himself. HMRC advised that they were entitled...until I told him off!
I had another who worked on building sites and took great delight in telling me that he had claimed the SEISS and spent it on a not tub.
As memyself says .. its a long time ago now and HMRC could easily have picked up the ones who had incorrectly claimed long before now.... a look and comparison with the turnover from one year to another should have sufficed.
HMRC would appear to have cherry-picked for itself a winnable case of insignificant small potato amount, presumably to set in stone a precedent.
And whilst they’re busily enforcing that against mote serious miscreants, we’re halfway through the roarin’ twenties and from where I’m sat so many of the serial Scallywags have moved on to their next scams. Learn to keep up, HMRC!
Just this week I heard from a multi-company director/ shareholder whose tax planning includes sending Company A to the cleaners, and Pheonixing into Newco. Same way as he did just after lockdown.
Why not suggest to him that he should recover between companies by going to live in Brazil - and that swimming in the ocean will make him stronger for his return.
And hope he hasn't seen https://www.bbc.co.uk/news/articles/cek9mr43x1xo
I fundamentally disagree with many comments on here such as 'the money was just sitting around burning a hole in the employee pocket'. This is a gross over simplification at best. many people had financial commitments such as mortgages and credit cards to name just 2 that had to be met. the support was necessary and appropriate even with its wrinkles
Wrinkles?
Bounce back loans with no credit checks....
Eat out to help out...
The lottery of claiming against the last FPS in March 2020...
Truth is these birds are now coming home to roost.
i suppose your name gives it all away ;-)
Bounce back loans with no credit checks....
so people with poor credit ratings should be excluded from support? NO
Eat out to help out... hospitality suffered more than most so was it right to support them YES
The lottery of claiming against the last FPS in March 2020...
what was your better suggestion?
in the circumstances I think the government did a fantastic job in helping people you perhaps should concentrate on the people who committed fraud
My business worked in hospitality - EOTHE did nothing for the sector. As for bounce back loans (many of which were never repaid) would you risk your customers money to a client that you knew was insolvent. I'm guessing not.
That's why banks have procedures to filter out the feckless, the crooked and the stupid.
The government circumvented all of that.
Why was the rate of employment relief constantly changed? One minute 80% the next 70%. One minute no work allowed, the next some work.
I am trustee of a scout group. We do not 'trade' yet we received nearly £20k of 'grants' during covid - I questioned it at the time with the local authority - actually they had phoned me to encourage me to claim!
Now you know why there is a £20B black hole in the economy!
Interesting ... I don't dispute that there were probably more people who 'needed' help than those who happily snapped up 'unneeded' hand-outs, but the govt has always been readier to assist growth in borrowing than in saving.
As a child, when I first arrived in this country, my grandmother gave me a card with the inscription:
“Neither a borrower nor a lender be, for loan oft loses both itself and friend, and borrowing dulls the edge of husbandry.”
Whilst I doubt she knew of the origin, and I had to seek explanation as to the full meaning, the message has stuck with me for all my life.
Aside of a mortgage, I've never borrowed (not even a corporate overdraft) even when that meant missed 'opportunities' (or in the early days going hungry) ... and when I've later been in the fortunate position of having 'excess' savings, I find that a gift to a worthy cause or individual solves that 'problem'.
My point being less that of taking sides over the question of greed vs necessity, but more (beneath the surface as it were) questioning whether it is morally right for the govt to be so fixated on increasing indebtedness - or indeed fiscally wise to do so?
very poignant reply thank you very much. I aleays struggle with questions of morality as individual compasses are not calibrated in a universal way. Debt is so ingrained in the financial system its hard to see a way past it
Well, there speaks an accountant who was lucky enough not to have any clients who were unlucky enough to be terrified about how they were going to pay for their roofs and their childrens' food. We had lots.
Love to know the basis on which you've made that assumption ... especially since I said "there were probably more people who 'needed' help than those who happily snapped up 'unneeded' hand-outs"?
The rest of my post was (very clearly) a reminiscence of my upbringing .. leading to a question about why govts are so keen on encouraging indebtedness.
So absolutely nothing about my or anyone else's clients - let alone passing any comment on the situation in which anyone found themselves.
FWIW your use of "lucky enough not to have" struggling clients isn't just inaccurate, but something you might want to ponder ... as it suggests you consider yourself to have been unlucky to have such clients!
Yes, you did, fair enough. But I do not think it is appropriate to describe this particular case as "the birds coming home to roost" or to say that @Carnmores' description of it as a "wrinkle" isn't apt.
This taxpayer got really unlucky and I feel very sorry for her. If others cheated, that doesn't make her position less unlucky nor does it reduce my sympathy.
Ah, mystery solved. You're replying to me, but quoting from a completely different responder - and attributing their comments to me!
Oops, sorry. ::))
If it makes you feel better, I also simply use a template tax return and file exactly the same one for every client.
Mortgages and landlords were encouraged to accept that some would struggle
Evictions WERE NOT ALLOWED
Nobody worried about a roof over their head. Universal credit covers food if it is not being paid on housing.
Based on the numbers being discussed here it is difficult to understand why incorporation was suggested in the first place?
I thought that, but I think income may have increased as £12K salary against the small claim for CJRS. It might be just a decision based on limited liability.
An unlucky decision.
Still do not believe that she genuinely got confused. No wages in the relevant year is telling that she got rid of the accountant when Covid hit. Daft, as that was the time that she needed him most.
The salary was also daft as no EA so ERNIC and EENIC would be payable.
I don't believe there can be a single payment of CVJRS in the case of a company director of an OMB such as this where the claim is 100% legitimate in strict accordance with the rules. It is inconceivable that such directors reverted to their solely statutory duties (whatever they are) and done absolutely nothing else - answered a call, replied to a message, hoovered the company office if it come to it.
The difference is as we have seen, that they generally were not fool enough to admit it or post about it on Social Media.
My opinion completely.
She did not go prepared sufficiently to argue the wrong type of claim (per title) and clearly still has no accountant advising her.
She could have found another accountant to check the logic of her claim with, CJRS came first, and she did not figure it out.
I'm sorry, but the newly appointed accountant should carry the can on this one.
Back in 2020 when this came in, we were all wet behind the gills (DYOR etc).
Hopefuly her advisor has PI cover.
She sacked him or more likely did not pay him. No April wages tells us that.
He was not involved in making the claim.
Agree
It was all new.
Apologies for the heavy edit.
Just re read the article and newly appointed, not newly qualified. Sorry.
Whilst many were on furlough, it was lots of unpaid extra work for us back then.
A lot of my staff chose to be 'at higher risk'
My firm was just me and my daughter at the time, my time was lots of Emails explaining every change, and lots of phone calls because clients had nothing better to do.
I did all CJRS from beginning to end because it was risky and I did not want anyone making errors, any errors would be my fault.
How can she be advised by accountants to move to a Ltd co set up and not have a meeting to discuss the difference and implications and why it would be preferential from a tax efficiency pov? (presumably that's the only reason).
I find it hard to believe anyone would not raise questions about their altered status and responsibility as a director. I had a similar kind of client who frequently tried to claim unallowable expenses because she said everyone else in her industry did.
I therefore have limited sympathy. Though HMRC so often go after the easy target - the more vulnerable and naive rather than the deliberate evaders. So I do have some sympathy.
To be honest, I think a lot of the accountants on here would be dismayed to find that despite such meetings and education, the average client has little understanding of any appreciable difference between when they were Self Employed & now Incorporated (which is at least three separate statuses).