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SEISS 5: Tricky turnover test revealed

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To apply for the fifth SEISS grant, taxpayers will need to have two different turnover figures prepared in order to claim. But working out those figures won’t be easy for many traders. 

7th Jul 2021
Tax Writer Taxwriter Ltd
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The portal to apply for the final self-employed income support scheme grant (SEISS-5) is due to open later this month, but this time traders need to do their homework first or they will fall at the first hurdle.

As was the case for the first four SEISS grants, accountants won’t be permitted to apply on behalf of clients, so a good deal of hand-holding will be required for some traders.

Qualifying conditions

When applying for the first two SEISS grants the trader had to make a declaration that their business had been ‘adversely affected’ by the Covid restrictions, which is a term open to much interpretation.

To qualify for the third and fourth SEISS grants the trader also had to declare that their sales had reduced in the qualifying period due to the pandemic, compared to what would reasonably be expected for that period. However, the taxpayer was not asked to supply any figures to back up this assertion that sales were actually less than expected.

We were warned back in June that HMRC was tightening up the turnover test for the fifth SEISS grant and that taxpayers would have to prove their sales had reduced in order to qualify. HMRC has now released guidance on how to work out turnover for this test, but it is not logical and it may well confuse tax advisers and taxpayers alike.   

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Replies (52)

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By Duggimon
07th Jul 2021 09:58

Further to my reply here: https://www.accountingweb.co.uk/comment/860587#comment-860587 I note two other issues. First, HMRC's advice to "check the bank account you use for your business to account for money coming in from customers" is telling people to include VAT in their turnover figure, and second, any partners whose partnership share increased in the year are quids in, potentially being eligible for the grants despite income going up.

Why is it even a turnover test when the grants are to replace lost income? You might say it's because turnover is simpler than profits but if so, why shoot yourself in both feet and the head by making the turnover test impossible to follow for anyone with a year end outside of 31 March - 5 April? A test of relevant profits couldn't have been any more complicated than this mess.

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By Jon Stride
07th Jul 2021 10:04

The guidance is highly ambiguous. It needs to have worked examples - perhaps a self employed person with a 30 June year end.

Without this, there is greater scope for erroneous claims - or claims not being made when there is entitlement.

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By OrmeGoat
07th Jul 2021 10:07

Yet more bloody work thrown at us by the government on top of everything else in the last 15 months.

Thanks (16)
Replying to OrmeGoat:
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By richardotley
07th Jul 2021 10:14

You are absolutely correct, we have never been as busy for clients, but not doing core accounting work!

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Replying to OrmeGoat:
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By Ian McTernan CTA
07th Jul 2021 11:07

To be fair, it's more rubbish thrown at taxpayers by HMRC, as HMRC are responsible for drafting all this rubbish and throwing it at people.

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Replying to Ian McTernan CTA:
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By Andy L
07th Jul 2021 12:03

Work for us that the taxpayers will struggle to pay any fees we raise in respect of due to the reason they need to apply for grants....

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By SXGuy
07th Jul 2021 10:17

So essentially based on your example hmrc wish to ignore turnover between 1st May 19 to 30th April 20.

What if the turnover was higher in May 18 to 30th April 19? But lower in May 19 to April 20?
Its completely ignored. Unleas of course where they say you can instead use 18/19 tax return figures, then that may help.

So now we need to do 2 calculations for 20/21 and compare it to 19/20 or 18/19. And go with whicher figure is higher than April 20 to April 21.

But it's OK because apparently tax payers don't need an accountant.

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By raju m
07th Jul 2021 10:17

total confusion. What a load of ------. Even accountants find it difficult to understand.

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By sussieads
07th Jul 2021 10:20

Thank you very much for the guidance - I can only say that this is another triumph for the Office of Tax simplification!

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By Jas28
07th Jul 2021 10:21

The guidance says we should "not include any coronavirus (COVID-19) support payments, for example:
previous SEISS grants
Eat Out to Help Out payments
local authority or devolved administration grants"
But what about other grants? I have clients in the entertainments business who received grants from the Arts Council to compensate for shows cancelled due to covid-19. Are these also excluded from turnover, as they were coronavirus support payments? Or is it just the government and local authority grants that are excluded?

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By OrmeGoat
07th Jul 2021 10:30

I should have thanked you Rebecca before complaining about the government. Thank you.

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By Ian McTernan CTA
07th Jul 2021 11:09

Do HMRC seriously expect the average sole trader to understand (or be bothered to do) any of this?

Going to be a complete mess with many claiming too little or too much- the original simple idea has been turned into a monster by the pencil pushers at HMRC.

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By birdman
07th Jul 2021 11:27

...so, if someone has ceased trading since 5 April 2021 they WILL qualify? I can't see the "continuing" test anywhere in their guidance this time around. I have someone who ceased in June 2021, couldn't get PI cover at a sensible price so has retired, and he's just asked the question.

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By Truthsayer
07th Jul 2021 11:39

If you are a in a profession under ye olde Schedule D Case II, you need to account for work-in-progress as part of your profit calculation. I have always accounted for a change in w-i-p as an adjustment to turnover. Have HMRC thought about this point? Whether the adjustment to w-i-p is counted will surely in some cases affect people's eligibility.

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By DMBAcc
07th Jul 2021 11:39

You couldn't make it up !!!! ;-) These same ninkumpoops are going to "manage" MTC what a laugh.

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By janelm
07th Jul 2021 11:56

Thanks for this. I've dug out the Treasury Direction as referenced below - and I believe that even if your turnover is UP in 2020-21 compared to the reference period (i.e. you fail the financial impact declaration test condition), you may still be eligible to claim the 30% lower grant, PROVIDED that you are suffering reduced profits May-Sep 2021 and the other eligibility rules.

HMRC guidance implies by omission that your turnover must be REDUCED (either by more or less than 30%) to claim anything - and your article states that it has to be lower to qualify - but this would seem to over-interpret the Direction, that just says "In any other case"?

https://www.gov.uk/government/publications/treasury-direction-made-by-th...

5.1 Where one of the conditions in paragraph 5.3 is met, the amount of the SEISS 5 payment is the lower of-
(a) £7,500, and
(b) 3×(TP/12×80%).

5.2 In any other case, the amount of the SEISS 5 payment is the lower of-
(a) £2,850, and
(b) 3×(TP/12×30%).

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Replying to janelm:
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By Hugo Fair
07th Jul 2021 12:21

See excellent post by fawltybasil2575 at 07th Jul 2021 10:31 via https://www.accountingweb.co.uk/any-answers/seiss-5-finally-an-answer

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By abacusacc
07th Jul 2021 12:00

Apart from all the extra work....in this statement, see below, and on the HMRC website it states 1 April 2020 to 5 April 2020 or have I missed something...confused, must be the weather!

Step 1: 2020/21 turnover
Forget basis periods and accounting periods, what HMRC wants here is the turnover that fits almost exactly into the tax year 2020/21. This is the gross sales received in a 12-month period that started from 1 April 2020 to 5 April 2020 - essentially the sales recorded in that year.

Thanks (4)
Replying to abacusacc:
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By Southwestbeancounter
07th Jul 2021 14:15

Yes I got confused at that point too but I haven't had the time to read any further at this point so wondered if it was a typo?

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Replying to Southwestbeancounter:
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By kitarna
12th Jul 2021 10:15

After the twentieth time of reading..
I believe it means the 12 month period starting on any of the 5 days from 1st to 5th April 2020.
I guess it's to allow figures for a 31st march or 5th april year end.
It's all complete nonsense.

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By AndrewV12
07th Jul 2021 12:09

Turnover does not tell the whole story.

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By Cashmere
07th Jul 2021 13:05

One interesting thing with one of our clients is that we included the grants in their accounts as taxable turnover, and submitted the tax return. HMRC then added the Grants received onto the taxable profits, and increased the tax payable. We only realised this when the client contacted us to tell us they had had a letter from the taxman giving them a higher income. When we investigated we found that the difference exactly matched the grants. Apparently there is a new supplement for the grants received!

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Replying to Cashmere:
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By Andy L
07th Jul 2021 13:24

There is a separate box on the Self Employment pages of the tax return for the grants. Box 70.1

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Replying to Andy L:
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By DMBAcc
07th Jul 2021 14:38

Yes and though it galls me to say this - HMRC did actually give some helpful advice when one clicks on the question marks so at least I knew exactly where each of the different types of grants went. Unfortunately there is no explanation as to why local government grant of £10,000 is treated differently to the SEISS. Hey ho, the mysteries of the HMRC collective mind. Thinking Star Trek for a moment I suppose there are some similarities between HMRC and The Borg, though the main difference is that there is no logic to anything HMRC do.

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Replying to Cashmere:
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By Lawrence82
07th Jul 2021 13:26

You might want to check the tax return. SEISS shouldn't be included in turnover, there are separate boxes on the return to report the figures. Sounds like you have quite a lot of work to do correcting your accounts & returns if you've done it like that.

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Replying to Lawrence82:
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By Cashmere
07th Jul 2021 13:31

It is included in the turnover, which is what they say you should do, but there is a new supplement for Covid income, on there you have to tick the box to say that you have included the SEISS in your turnover. It's the same supplement which they want you to use to declare over-claimed grants

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Replying to Cashmere:
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By Southwestbeancounter
07th Jul 2021 14:18

Is there confusion between the business rates grants, for instance, and SEISS here?

The business rates grants should be included as 'other income' hence turnover but the SEISS we have been putting in as CI and then declaring it in the separate SEISS box and that seems to work.

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Replying to Southwestbeancounter:
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By Cashmere
07th Jul 2021 17:03

Sorry, yes, ignore al previous drivel which I have been spouting!!

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Replying to Southwestbeancounter:
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By Cashmere
07th Jul 2021 17:03

Sorry, yes, ignore all previous drivel which I have been spouting!!

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By bluebaron
07th Jul 2021 13:28

This is ridiculous. Why not make it even more fun and do turnover from the first lock-down on 23rd March 2020..??!!!

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By North East Accountant
07th Jul 2021 16:13

I hope the people at HMRC who wrote this garbage are nowhere near the MTDfIT stuff......

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Chris M
By mr. mischief
07th Jul 2021 17:19

Having read all this, my overall guidance to clients will be to make up any old plausible figure they want that gets the grant. I'm keeping well out of this. if HMRC want to come up with stupid rules and block accountants out of the picture that was their bed they made, they can effing well lie in it!

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By KenKLM
07th Jul 2021 17:49

Use “money in” for sales …what about if they are VAT registered !

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Replying to KenKLM:
Pile of Stones
By Beach Accountancy
07th Jul 2021 20:10

... and are in a VAT Repayment situation!

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My photo
By Matrix
07th Jul 2021 22:16

So cash basis only?

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By GHarr497688
07th Jul 2021 18:15

43 years in Accountancy and I feel so frightened of what I read. Who on earth makes up this rubbish. When I went into Accountancy it was a respected profession now with what HMRC are doing any clown could make up the rubbish they ask for. No logical well educated person would make up this complete mess of an instruction. SOS .

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By eppingaccountant
07th Jul 2021 19:09

Rebecca, after Step 4, you have a paragraph headed "T'int right, T'int Fit & T'int Proper". What does T'int mean please?

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By Hugo Fair
07th Jul 2021 19:41

It isn't (or It ain't or It is not ... depending on your preferred dialect/colloquialism).

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Replying to eppingaccountant:
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By spilly
08th Jul 2021 08:14

A saying frequently used by Jud Paynter, a character in the Cornish-set Poldark novels by Winston Graham.

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By Ken Moorhouse
16th Jul 2021 07:51

For the 12 months from 1-5 April 20 calculation: Surely anyone on VAT Cash Accounting would just need to get the totals for the 4 relevant VAT quarters (Gross turnover as the guidance implies), then adjust for the beginning and end period. In my case my VAT quarter starts May, so I will calculate the turnover for April 2020, add it to the total, then subtract the April 2021 turnover.

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Paul Johnson Owner Books and Figures
By PJ30
19th Jul 2021 12:59

Fostering income &SEISS-5

Thanks for the article Rebecca.

I am almost too scared to ask - head/keep/parapets/below - comes to mind :(

I am an almost retired practitioner; one elderly client refuses to

She is a s/e interpreter and foster parent. Her turnover/income from interpreting is 100% less than pre-pandemic. Her fostering payments are unaffected.... Do HMRC intend to compare her combined turnover pre-post-pandemic or only for interpretation?

Nervously, Yours
Paul

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Replying to PJ30:
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By Andy L
19th Jul 2021 13:14

Hi Paul

It is combined turnover which is compared.

This from the HMRC Guidance:

"If you have more than one business as a sole trader:
Your figure must include the total turnover from all of your businesses. This includes any new business you started between April 2020 and April 2021."

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Replying to Andy L:
Paul Johnson Owner Books and Figures
By PJ30
20th Jul 2021 10:49

Thanks Andy

In Treasury Directive it refers to "trade" - I don't believe fostering is a trade...? Is this an escape clause for her?
-----
TD:
6.1 The financial impact declaration test (the “FID test”) is met if the turnover of the TRADE in the pandemic period is at least 30% less than the turnover of the trade in the reference period.

6.2 For the purposes of this paragraph- no mention that "trade" means any form of business.

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Replying to PJ30:
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By Andy L
20th Jul 2021 12:02

Hi Paul

My feeling is that as Foster Carers can qualify for the SEISS grants even where fostering is their only source of income, that HMRC will almost certainly seek to treat the turnover declared as part of the calculation.

I can't find a definition of 'Trade' in any of the official directions but the fact fosterers are required to register as self employed and file self employed pages of a tax return may well be leading, as it probably is in qualifying them for the grants in the first place.

There are far cleverer people reading these posts than me though so hopefully someone will be able to shed some extra light....

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Replying to Andy L:
Paul Johnson Owner Books and Figures
By PJ30
20th Jul 2021 13:12

Re your last para Andy - me too! Amen

(But it's not looking good...)

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Morph
By kevinringer
19th Jul 2021 15:16

Given that SEISS5 is for reduction in profits May 2021 to September 2021, why is the turnover test applied for April 2020 to April 2021?

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Replying to kevinringer:
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By Andy L
19th Jul 2021 16:19

I guess because they will have access to those exact figures to verify them, once all tax returns are in. (*edit* Although if people don't have a 5th April / 31st March year end then that's not the case either...)
The way it's written, the grant is actually for those adversely affected during May to September, not necessarily that their profits have gone down in comparison to before, down from what they might otherwise have been. You have to wonder if they will ever really be able to have the resources to check that.......

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Morph
By kevinringer
19th Jul 2021 15:16

Given that SEISS5 is for reduction in profits May 2021 to September 2021, why is the turnover test applied for April 2020 to April 2021?

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Morph
By kevinringer
19th Jul 2021 15:23

https://www.gov.uk/guidance/work-out-your-turnover-so-you-can-claim-the-... says:

"For each partnership, you’ll need to work out and include your percentage share of the partnership’s turnover."

Partners have a share of profit, not a share of turnover. How is the share of turnover calculated?

For example, Partner A:B:C have a PSR 10:45:45 after deducting a partnership salary of £25,000 for Partner A. Profit for 2020-21 was £15,000 which after the salary is a loss of £10,000 so will be A:B:C £24,000:Loss £4500:Loss £4500. For tax purposes you can't have some partners with profits and others with losses so it is £15,000:£nil:£nil. But what happens if there were capital allowances of £25,000 reducing the profit to £nil so the shares A:B:C are £nil:£nil:£nil. What are each partner's share of turnover? Could be 10:45:45, could be 24000:-4500:-4500, could be 15000:0:0 could be 0:0:0.

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Replying to kevinringer:
Paul Johnson Owner Books and Figures
By PJ30
20th Jul 2021 10:44

Treasury Directive clearer:
6.4.2 Where in the reference period a person carries on a trade in partnership and carries on another trade-

(a) in a different partnership, or

(b) alone,

the turnover in relation to the partnership for the reference period and the pandemic period is that person’s share of the partnership turnover TO BE DETERMINED IN ACCORDANCE WITH THE PERSON’S SHARE OF PROFIT OR LOSS UNDER THE RELEVANT PARTNERSHIP’S PROFIT SHARING ARRANGEMENTS for the basis period to which the reference period relates

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