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Confused orang utan | accountingweb | SEISS: Taxpayer who had ceased trading has to repay grants
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Confused taxpayer has to repay SEISS grant

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A taxpayer’s misunderstanding of the SEISS rules and HMRC’s automated replies did not make his claims valid, so the assessments to repay the grants were upheld.

8th Aug 2023
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David Hamill was self-employed between 18 June 2018 and 31 October 2018, submitting his tax return prior to 23 April 2020.

He subsequently submitted a claim under the Self-Employment Income Support Scheme (SEISS) for the period 13 May 2020 to 13 July 2020, receiving a payment of £810 in June 2020. This was followed by a further SEISS claim ostensibly for the period 17 August 2020 to 19 October 2020, which led to a further payment of £709 in September 2020.

HMRC emailed Hamill in October 2020 regarding his eligibility to these SEISS payments. Hamill dutifully responded and confirmed that he had not traded in the 2019/20 tax year as he had “been unable to secure employment”. 

Email confusion

Hamill was confused by HMRC’s email, as previous correspondence had said: “We have checked your claim and can confirm that we are now processing your grant”. This was followed by another email after his second application stating: “The eligibility criteria remains the same, as for the first grant”.

Hamill therefore believed HMRC had confirmed his eligibility for both of the payments. Following his reply he was told to complete a “G-form”, a completed copy of which was held by HMRC (although Hamill claimed to have no memory of having completed it).

Moving the goalposts?

Based on the contents of the G-form, HMRC issued an assessment for the full £1,519, on the basis Hamill was not in fact entitled to the payments.

Hamill appealed against this assessment in December 2020, as he believed that HMRC had now “changed the rules, post payment, purely for financial and political gains”. HMRC offered a review, however Hamill opted to go straight to the first tier tribunal (FTT).

The SEISS Direction section 4 sets out the conditions to be a qualifying person and so eligible for the initial SEISS payments. This includes a requirement to have carried on a trade in 2018/19 and 2019/20, and to intend to continue to carry on a trade into 2020/21 (my emphasis).

Based on the information provided by Hamill, HMRC was therefore content that he was not self-employed in the 2019/20 tax year and should not have received the two payments. On that basis, its assessment to recover the payments was correct.

Erroneous assumptions

Hamill’s arguments were, unfortunately for him, based on erroneous assumptions. He believed that HMRC had checked his 2018/19 tax return and that beyond that it was only interested in earlier years, meaning the 2019/20 and 2020/21 tax years were irrelevant. He also seemingly believed his second claim had been encouraged by HMRC, by extension implying they had checked and agreed the first claim.

Both of these assumptions were incorrect, with the FTT noting that the earlier tax years were only relevant in so far as they formed the basis for the calculation of the payments.

HMRC argued that at the point that it received the claim forms, neither the 2019/20 nor the 2020/21 tax returns had been submitted. This meant that it was entirely reliant on Hamill to confirm that he met the forward-looking trading conditions, which he had done when he submitted his claims.

While HMRC did hold a 2018/19 return which noted that the trade had ceased, it relied on Marriott vs Lane which stated that, where a business ceased but resumed shortly after, it may be correct to conclude that the cessation could be ignored for income tax purposes.

The cessation noted on the 2018/19 return could therefore merely have been temporary, so in the absence of other evidence, Hamill’s confirmation that he had continued to trade was, initially, accepted at face value.

However, with the benefit of hindsight, it was clear that the trade had permanently ceased in the 2018/19 tax year.

Mistaken beliefs

The trading conditions required to claim the first two SEISS payments were not met and the FTT therefore found that HMRC’s assessment to recover the overpaid amounts was correct, competent and in time.

The FTT concluded by noting that Hamill’s arguments were clearly based on mistaken beliefs, for which neither the FTT nor HMRC blamed him. This, however, did not change the fact he had not met the necessary conditions.

It also addressed complaints Hamill had made during the hearing regarding HMRC’s behaviour, though merely to confirm it had no jurisdiction in such matters.

The appeal was dismissed.

An easy win

An easy win for HMRC. The conditions for receiving the first two SEISS payments clearly require the taxpayer to continue their trade after the 2018/19 tax year, which Hamill had subsequently confirmed in writing he had not.

Another instance where a taxpayer could have avoided a lot of hassle and cost had they engaged a professional adviser.

Replies (13)

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By Hugo Fair
08th Aug 2023 21:08

I trust the plaintiff was self-represented ... as in I'd hate to think he incurred any extra costs for professional advice!

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Replying to Hugo Fair:
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By petestar1969
09th Aug 2023 09:48

Very last line of the article....

"Another instance where a taxpayer could have avoided a lot of hassle and cost had they engaged a professional adviser."

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By sallycox
09th Aug 2023 09:47

I seem to recall that we were advised not to become involved in SEISS claims, but maybe my reollections are not accurate.

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Replying to sallycox:
By Husbandofstinky
09th Aug 2023 10:16

You are correct in your recollection.

Tax payer made the claim. Some asked for advice from their agent. Many didn't and just claimed anyhow.

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Replying to sallycox:
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By chrisslight
09th Aug 2023 10:16

Your recollection is correct and HMRC stance was always going to result instances like this.

We have seen many cases similar to this.

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Replying to sallycox:
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By philaccountant
09th Aug 2023 16:11

It's actually worse than your recollection: Agents were excluded from the process - at a time when they could have prevented erroneous claims - whilst at the same time being instructed to police the claims on HMRC's behalf after the fact.

So HMRC gave out the money to taxpayers* and then said it was our job to make sure they'd done it correctly. And of course be it on your head if your client claimed incorrectly. If they did, it's your job to tell the client and take the flack, whilst also being exposed to the potential money laundering risks.

It's a perfect distillation of a modern day HMRC system in a nutshell.

*Apologies, I meant to say customers not taxpayers.

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Replying to philaccountant:
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By johnjenkins
13th Aug 2023 15:13

I always thought that one of the reasons Tax payers had to claim themselves was to encourage "tax accounts" being opened.

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By Duggimon
09th Aug 2023 10:13

Rather fortunate the financial penalty was limited to the ill gotten gains. The scheme was called the Self Employment Income Support Scheme. It seems obvious that it's for self employed people and regardless of what automated letters they receive, anyone invited to apply who isn't self employed should probably at least check the freely available and widely disseminated rules, which were very clear on the need for claimants to actually be self employed at the time of the claim.

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By graydjames
09th Aug 2023 10:21

What gets my goat and leaves me with not one scintilla of sympathy for this bloke is that he argued the rules had been changed retrospectively "purely for financial and political gains" as if that would justify his appeal.

This is the kind of Trumpian world we live in today.

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Replying to graydjames:
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By Postingcomments
09th Aug 2023 12:08

It's the loan scammers who bang on about the rules being changed retrospectively.
With their "loans" which are called loans, but which have none of the characteristics of a loan.

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Replying to graydjames:
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By Dr Fauci
09th Aug 2023 13:25

Trump lives rent-free inside so many people's heads. Why still the obsession?

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By gillybean04
09th Aug 2023 13:21

Jesus wept. People can't get decent social or health care while this fine specimen is allowed to make an appeal that never had any prospect of success and has all the hallmarks of someone who is at it.

Hones in on a few selective and ambiguous words in emails but conveniently blind to the very clear wording on the claim.

Self employed for less than 15 weeks followed by a claim of unemployment for 4 years (nearly 18 months before covid). Who is willing to wager he received the increased universal credit payments too?

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By AndrewV12
10th Aug 2023 08:32

'He subsequently submitted a claim under the Self-Employment Income Support Scheme (SEISS) for the period 13 May 2020 to 13 July 2020, receiving a payment of £810 in June 2020. This was followed by a further SEISS claim ostensibly for the period 17 August 2020 to 19 October 2020, which led to a further payment of £709 in September 2020.'

As far a SEISS grants go its very small beer.

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