11. Mr C complains that HMRC has not considered his personal circumstances and the fact he made an ‘honest mistake’ when completing his 2018-19 tax return when it decided his eligibility for the SEISS.
12. Mr C has told us that the ‘personal circumstances’ HMRC has not taken account of are that it was the first time he completed a tax return and that he ‘moved the exact same amount of money’ from the non-trading income section of his tax return to the trading income section.
13. Mr C says the 2018-19 tax return he completed was his first one after making the decision to become self-employed. He says HMRC has not taken account of the fact he simply wrote some of his income figures in the wrong section of the form because of his inexperience, which he feels amounts to an ‘honest mistake’.
14. He says HMRC should be able to recognise his case is not an attempt to de-fraud the scheme, and as a result, he thinks HMRC should use discretion to change its decision.
15. From the evidence we have seen, we can see on 22 August 2019, Mr C submitted his 2018-19 tax return to HMRC.
16. On 26 March 2020, in response to the COVID-19 pandemic, the Chancellor of the Exchequer (the Chancellor) introduced the SEISS to support the eligible self-employed members of the public whose income had been, or would be, affected by the health, social and economic emergency in the United Kingdom as a result of COVID-19.
17. The Treasury Direction made under Section 71 and 76 of the Coronavirus Act 2020 (April 2020), sets out the eligibility rules and criteria that HMRC must follow as the administrator of the SEISS. As such, the direction requires HMRC ‘to be responsible for the payment and management of amounts to be paid under the scheme as set out in the Schedule to this direction’.
18. On 13 May 2020, Mr C used HMRC’s online eligibility checker to check whether he was eligible for the SEISS and he found out that he was not. Following this, Mr C checked his 2018-19 tax return and established he had incorrectly entered £6,109 as employment income instead of self-employed profit. Mr C subsequently amended this error.
19. On 18 May 2020, Mr C contacted HMRC and asked it to review his SEISS eligibility. He said it was the first tax return he had submitted and he had entered figures in the wrong section by mistake. He also said he now qualified for the SEISS grant.
20. On 1 June 2020, HMRC wrote to Mr C and said that he was not eligible for the SEISS because his non-trading income in 2018-19 was £13,747 and his self-employed profit was £8,690. HMRC said that to be eligible for SEISS, his self-employed profits had to be at least equal to his non-trading income. It also said that any amendments made to the tax return needed to be submitted by 23 April 2020.
21. For the interests of clarity, the date given by HMRC in this letter was incorrect. The cut-off date for amendments to 2018-19 tax returns for the purposes of the SEISS was 6pm on 26 March 2020. HMRC’s tier 1 and tier 2 complaint responses, which we refer to below, contain the correct cut-off date.
22. On 19 June 2020, HMRC received Mr C’s tier 1 complaint. Mr C asked HMRC to review his eligibility and asked it to understand his decision to input £6,109 into the wrong section of the tax return was ‘wrong’ and his own ‘naive mistake’.
23. He said it was the first tax return he had completed and his inexperience was why he completed the tax return incorrectly. He also said that since his amendment, his profit from self-employment now exceeded his non-trading income, thus making him eligible for the SEISS.
24. On 17 July 2020, HMRC responded and told Mr C he was not eligible for the SEISS grant because the self-employed profit that he declared on his 2018-19 tax return was less than half of his total income. It explained that regardless of the fact he had since corrected the error, it could not accept any amendments made to tax returns after 6pm on 26 March 2020.
25. On 3 August 2020, Mr C raised a tier 2 complaint. He said he did not think HMRC was taking account of the fact the correct figure was on the tax return, albeit in the incorrect section, and it was instead only relying on the fact it cannot accept amendments after 6pm on 26 March 2020.
26. He also said the fact he amended his return as soon as he was aware of his error, and duly paid the subsequent additional tax, which was due as a result of his amendment, shows that he was not attempting to fraudulently alter his income to meet the SEISS criteria.
27. On 19 August 2020, HMRC sent its tier 2 response to Mr C. HMRC said that as the administrator for the SEISS it is obliged to follow the direction set down by the Treasury. It said that because Mr C carried a trade in the 2018-19 tax year but did not trade in 2016-17 and 2017-18, his trading income for 2018-19 must be more than the non-trading income he received.
28. It said, however, Mr C’s original 2018-19 tax return showed his non-trading income was higher than his trading income and this is why he was not eligible. Despite him correcting his tax return to meet the profit conditions of the SEISS, because his amendment was made after 6pm on 26 March 2020, HMRC could not overrule its original decision and award him the grant.
29. Finally, HMRC said it did not believe Mr C’s amendment was ‘in any way dishonest’. It was ‘simply that it [the amendment] was made after the closing date and HMRC has no discretion in this matter’.
30. As referenced above, the Treasury Direction made under Section 71 and 76 of the Coronavirus Act 2020 (April 2020) sets out the eligibility rules and criteria that HMRC must follow as the administrator of the SEISS.
31. Section 10 of this direction says, ‘For the purposes of SEISS, amounts of trading profits and relevant income are determined by reference to a person’s tax returns as at 23 April 2020 but no account will be taken of any amendment made to a tax return on or after 6pm on 26 March 2020’.
32. Although I appreciate Mr C’s error was an honest one, HMRC does not have discretion to alter its decision because of an ‘honest mistake’.
33. As part of our enquiries, we have established HMRC does have limited discretion for SEISS purposes. HMRC has provided us with its internal guidance setting out the instances in which HMRC can refer a SEISS case to a discretionary board for consideration.
34. We can see from HMRC’s Discretionary SEISS Claim Governance Board Submission Form that there are only four criteria that would cause HMRC to refer a case to its discretionary board.
35. The criteria are:
· an HMRC error or process that is causative in preventing the taxpayer being eligible for SEISS and is demonstratable by evidence
· having relied on the online eligibility tool, the taxpayer is worse off than they would have been had HMRC told them they were ineligible from the outset and is demonstratable by evidence
· the taxpayer who would otherwise be eligible was in a geographical location so remote they could not have been aware of the rules and deadlines, or been able to comply or meet the deadlines, of the scheme
· all the following criteria being met:
(i) the taxpayer has made attempts to be compliant
(ii) the taxpayer has been unable to comply with the requirement to file a tax return by the relevant date or make a claim by the relevant date because of a vulnerability
(iii) the consequences of not paying the grant would be unconscionably harsh.
36. From the evidence available to us, we can see HMRC was not able to take account of what Mr C refers to as his ‘personal circumstances’ when deciding whether to change its SEISS decision because his circumstances did not meet the criteria as set out in its internal guidance.
37. Mr C says nobody knew there would be a ‘worldwide pandemic’ and his 2018-19 tax return would be used to give financial support to him. He says that he would have rectified the error eventually and that he ordinarily had up until 31 January 2021 to make any amendments necessary to his 2018-19 tax return for purposes other than the SEISS.
38. However, irrespective of any deadlines that may or may not apply to the alteration of tax returns for general tax purposes, the Treasury Direction above says that the deadline for amendments for SEISS purposes is 6pm on 26 March 2020.
39. Tax returns are, in their nature, self-assessed and HMRC accepts them in good faith and operates a ‘process now, check later’ policy. The onus remains on the taxpayer to ensure that all the details contained within a tax return are correct.
40. From the evidence available to us, we can see Mr C incorrectly completed his tax return, and despite quickly rectifying his error once he became aware of it, his tax return could not be used to change HMRC’s eligibility decision.
41. This is because HMRC was following the criteria in the Treasury Direction as set out by the Chancellor. A Direction is an exercise of ministerial authority by an Act of Parliament and is legislative in its nature. This means HMRC is legally obliged to follow the Direction as set out. We can also see that in the limited circumstances where HMRC does have discretion at its disposal in SEISS cases, Mr C did not meet the criteria as set out.
42. Our ‘Principles of Good Administration’ say public bodies ‘must comply with the law’ and they must also ‘follow their own policy and procedural guidance, whether published or internal’.
43. From the evidence available to us, we can see HMRC has acted in line with the Treasury Direction as set out, and our Principles, when it made its decision regarding whether to award Mr C the SEISS grant and when it considered the ‘personal circumstances’ he raised with it during the complaints process.
44. As such, we will take no further action.