Further news re SEISS claims

Further to our news post of 30th April 2021 regarding penalties for the abuse of the SEISS grants, we’ve fielded queries regarding how clients can prove the validity of their SEISS grant claims.

HMRC has confirmed that it will involve agents when looking into clients’ SEISS claims, despite side-lining them when clients needed to claim SEISS.

Entitlement conditions changed during the course of the pandemic, so there are different criteria for the later grant periods.

To help you understand the above criteria, please read the following detail.

Business adversely affected
This includes being unable to work because shielding, self-isolating, on sick leave or having care responsibilities because of coronavirus.
It also includes scaling down or temporarily stopping trading due to interrupted supply chains, fewer or no customers, staff unable to work or one or more contracts have been cancelled and the business tried to replace the lost work.
Isolation or caring responsibilities due to arrival in the UK are not valid adverse circumstances for SEISS, increasing the jeopardy of overseas travel this year.

Basis period in which the qualifying period falls

The qualifying period for SEISS 4 is 1 February to 30 April 2021 (and for SEISS 3 it was 1 November 2020 to 29 January 2021), but the basis period which must have a ‘significant reduction’ in trading profits depends what date accounts are made up to.
For many, the qualifying period may fall into two separate accounting years and, at the time of claiming, there must be a reasonable, honest belief that profits for at least one of those will suffer a significant reduction because of coronavirus. The significant reduction in profits must be for the basis period as a whole, not just the qualifying period, and it must be due to reduced sales - increased costs are not relevant for SEISS 3 and 4 claims.

Significant reduction
The Treasury and HMRC have declined to give any definition of “significant”, except to comment that it must be an honest assessment. It seems that a 30% reduction is definitely significant (based on the future SEISS 5 structure), but it may be argued that a smaller reduction is significant too, particularly if the claimant has no other source of income.
The percentage reduction is by comparison with what ‘would otherwise have reasonably been expected’, ie what profits were or could have been forecast to be if it were not for the pandemic.

Penalties and repayment of SEISS
HMRC has powers to assess overpaid SEISS even before 2020/21 tax returns are submitted, but otherwise SEISS wrongly claimed must be included on tax returns.
If a claimant didn’t know they were not entitled when the grant was received there will be no penalty, provided the grant has been repaid by 31 January 2022. At the other end of the scale, failure of a claimant to notify HMRC of a grant they knew they were not entitled to when received will be treated as deliberate and concealed for penalty purposes.

HMRC has a web page for anyone needing or choosing voluntarily to repay some or all of a SEISS claim. https://www.gov.uk/guidance/tell-hmrc-and-pay-the-self-employment-income-support-scheme-grant-back.