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HMRC will have to examine closely the coronavirus support provided to accountants and their clients. In this connection, Elizabeth Whiteley provided a summary of the guidelines and what could be the possible sanctions given to accountants and their clients if they want to take advantage of the SEISS (Self-Employed Income Support Scheme).

In an effort to recover wrongfully claimed coronavirus support payments, the Treasury has given HMRC sufficient resources to make their work a lot easier. It is anticipated that more than a third of the grants will be recovered.

According to HMRC, they will ask the help of the agents when it comes to investigating the clients’ SEISS claims, despite the fact that they have ignored them during the time that the clients needed to claim SEISS.

How to Prove the Validity of SEISS Claim?

There were some significant changes with regards to the entitlement conditions for SEISS.

Conditions that needs to be satisfied	SEISS 1	SEISS 2	SEISS 3	SEISS 4
Qualifying period	Up to July 13, 2020	From July 14 to Oct 19, 2020	Nov 1, 2020 to Jan 29, 2021	Feb 1 to April 30, 2021
Desire to continue their business in the tax year 2020/2021 for SEISS 1 to 3 and 2021/2022 for SEISS 4	YES	YES	YES	YES
Capability, activity, or demand for trading is limited or temporarily unavailable during the qualifying period,  compared with what should have been but for the adverse impact of coronavirus	N/A	N/A	Decrease in sales during the qualifying period	Decrease in sales during the qualifying period
Belief that there is a significant decrease in the trading profits during a basis period wherein the qualifying period falls due to minimal capability, activity or demand as a result of the coronavirus	N/A	N/A	Decrease in trading profits during an entire basis period	Decrease in trading profits during an entire basis period

What does the following means?

Business adversely affected

This means that you cannot work because you are on sick leave, on self-isolation, have to care for someone or want to protect yourself from coronavirus.

If caring responsibilities or isolation is associated with the arrival in the UK then it is not considered as adverse causes for SEISS, increasing the risk of traveling abroad this year.

It also incorporates reducing or temporary stopping of operation due to limited supply chains, employees unable to work, less or no customers, contracts are cancelled and the company is trying to replace the lost work.

Basis period wherein the qualifying period is included

As mentioned above, the qualifying period for SEISS 3 is from November 1, 2020 to January 29, 2021 and February 1 to April 30, 2021 for SEISS 4. However, the basis period wherein there is a significant decrease in trading profits will likely depend on the the date accounted for.

It is possible that the qualifying period of some companies fall into two accounting years. Also, during the period of claiming, there should be a sincere belief that the trading profits of at least one of these can endure an ultimate reduction due to coronavirus. Also, the significant decrease in trading profits should occur during the basis period as a whole, not simply on the qualifying period. The reason should be reduction in sales and not increase in costs since they are not significant for SEISS 3 and 4 claims.

Significant reduction

Unfortunately, HMRC and the Treasury have not given the exact definition of “significant”, however, they made a comment that it should be an honest assessment. Based on the upcoming SEISS 5 structure, having a 30% reduction seems to be significant enough. Nevertheless, having a smaller reduction could be more significant as well, most especially, if the claimant does not have any other source of income.

The percentage reduction is based on what could have been expected. In other words, the future profits that could have been earned if not for the pandemic.

Penalties and repayment of SEISS

HMRC can make an investigation on any overpaid SEISS even before the submission of the 2020/21 tax returns. However, if the SEISS was wrongly claimed, then it must be incorporated on tax returns.

In case the claimant is not aware that they were not qualified when they received the grant, then no penalty will be imposed, as long as the claimant is willing to repay the grant up to January 31, 2022. On the other hand, if the claimant did not let HMRC know about the grant that they receive, even if they were aware that they were not qualified, then it will be considered as deliberate and hidden for the purpose of penalties.

If you choose to voluntarily repay a portion or the entire SEISS claim, then you can visit the web page of HMRC. H

Be prepared

Accountants can help clients to some extent when it comes to gathering sufficient evidence every time a claim is being made by the client. They should prove that the pandemic has greatly affected their trade during the time of the SEISS claim. A rundown of the significant dates should also be presented. For instance, the closure of school and childcare.

Perhaps the best thing that the accountants can do is to store evidence on file for every SEISS claim made by their clients. This can greatly help in the preparation of their client’s 2020/21 tax returns.

Engagement terms

Before advisers give any advise to their clients about SEISS, most especially in connection to HMRC enquiries, they should check first if this is included in their terms of engagement letters. Most often, this is only limited to
advice on tax and accounting.