HMRC
13. Mr W complains that HMRC has not awarded him the SEISS grant because he ticked the wrong box on his 2018-19 personal tax return form.
14. Mr W is self-employed and works in the construction industry as a glazer. On 31 May 2020, HMRC rejected Mr W’s application for the SEISS. It said Mr W did not qualify because his 2018-19 tax return, which he submitted in May 2019, did not contain details of any self-employment income, and therefore, he did not qualify to claim self-employment-specific funding.
15. Before Mr W was rejected for the SEISS grant, he was unaware that he had made an error on his tax return. Mr W says HMRC told him that he could apply for the second wave of SEISS funding in July 2020 and that his application would be re-evaluated.
16. On 12 June 2020, Mr W amended his 2018-19 tax return. His second application for the SEISS was declined as he had made amendments to his 2018-19 tax return after 6pm on 26 March 2020.
17. On 13 July 2020, Mr W raised a formal complaint and said that he had not been aware of the mistake he had made. He said he could not amend the return online, as he had submitted his tax return in a paper format, and that he had been told by HMRC that if he amended the tax return and re-submitted his SEISS application, his application could be re-assessed.
18. On 8 August 2020, HMRC wrote to Mr W and explained the eligibility criteria for the grant. It also told Mr W that the amendments made to his 2018-19 tax return indicated he had not paid enough tax on his earnings, resulting in a National Insurance (NI) underpayment of £604.52.
19. On 14 August 2020, an accountancy firm contacted HMRC on behalf of Mr W and asked it to ‘take a genuine look’ at his application. HMRC responded and repeated what it had told Mr W regarding the eligibility for the SEISS.
20. On 24 August 2020, Mr W’s MP’s office contacted HMRC on his behalf and asked it to reconsider its decision regarding his eligibility for the SEISS.
21. HMRC wrote to Mr W’s MP on 9 September 2020 as the final tier of its complaints process. HMRC explained what calculations and tax year were used to determine whether Mr W was eligible for the SEISS grant under the government’s criteria, and why he remained ineligible.
22. HMRC said that as the 2018-19 tax return was incorrect, it could not be used for SEISS calculations. When the 2018-19 tax return could not be used, HMRC reviewed the personal tax returns for the years 2016-17, 2017-18 and 2018-19 to come to an average.
23. However, because Mr W did not trade in 2016-17, or he did not submit a tax return, this meant HMRC could not use this averaging method to establish eligibility either. Finally, HMRC said that as the 2018-19 tax return was amended after the cut-off dates as set out in the government’s SEISS direction, Mr W remained ineligible. It said Mr W could escalate his complaint to the AO if he remained dissatisfied.
24. On 15 September 2020, Mr W asked the AO to review HMRC’s decision. On 10 November 2020, the AO issued its final decision, and it did not uphold Mr W’s complaint.
25. To help us consider this complaint, we considered the SEISS and the eligibility surrounding it.
26. On 26 March 2020, the government announced the SEISS. The SEISS is a scheme that was introduced initially to cover lost income for self-employed workers for three months between March and May 2020. People could apply for the SEISS from 13 May 2020.
27. At the end of May 2020, the SEISS was extended to cover earning lost in June, July and August 2020, with the start date for applicants being 14 July 2020.
28. The Coronavirus Act 2020 Functions of Her Majesty’s Revenue and Customs (Self-Employment Income Support Scheme) Direction sets out the legislation by which HMRC are responsible for the payment and management of the amounts to be paid under the SEISS.
29. Treasury Direction made under Sections 71 and 76 of the Coronavirus Act 2020 (April 2020) outlines the criteria that must be met to be eligible for the grants. Section 4 of this direction sets out the conditions a person must meet to qualify.
30. Section 4.2 says:
‘The person must:
(a) carry on a trade the business of which has been adversely affected by reason of circumstances arising as a result of coronavirus or coronavirus disease
(b) have delivered a tax return for a relevant tax year on or before 23 April 2020
(c) have carried on a trade in the tax years 2018-19 and 2019-20
(d) intend to carry on a trade in the tax year 2020-21
(e) if that person is a non-UK resident or has made a claim under section 809B of ITA 2007 (claim for remittance basis to apply), certify that the person’s trading profits are equal to or more than the person’s relevant income for any relevant tax year or years
(f) be an individual, and
(g) meet the profits condition’.
31. Section 4.3 says a ‘relevant tax year’ is all or any of the tax years 2016-17, 2017-18 and 2018-19.
32. Section 10 of the direction also says, ‘no account will be taken of any amendment made to a tax return on or after 6pm on 26 March 2020’.
33. The direction issued for the second wave of the SEISS that Mr W applied for in July 2020 carried the same qualifying and assessment criteria as the above.
34. In essence, from the evidence available to us we can see that when HMRC considered Mr W’s application for the SEISS, it followed the direction as set out by the Chancellor of the Exchequer (the Chancellor).
35. In basic terms, HMRC’s view was that because Mr W’s 2018-19 personal tax return did not contain any income from self-employment, he was not eligible. Mr W told HMRC he did not complete the tax return himself and it was completed by his agent and that he did not become aware of the error until he applied for the SEISS.
36. However, under the section ‘How to fill in your tax return’ in HMRC’s ‘Tax Return Notes’ for the 2018-19 tax year it says, ‘If you ask someone else to fill in your tax return, you’re still responsible for the information on it’.
37. This means HMRC could not accept Mr W was not aware of the error until after he had applied for the SEISS as the onus was on him to know that the information submitted was correct.
38. Following our enquiries, HMRC reviewed the way it processed Mr W’s 2018-19 tax return and how this flowed into his applications for the SEISS.
39. On 14 September 2021, HMRC told us it had identified an error it had made when processing Mr W’s 2018-19 tax return. It told us that when processing Mr W’s tax return it had not followed its own ‘capture guidance’.
40. HMRC told us its ‘capture guidance’ says that when an individual does not include a self-employed page in their paper return, but they have included self-employed income under ‘other income’, it should (where the ‘other income’ is clearly related to self-employment) accept it as such and create a self-employment page on the return. It said in Mr W’s case, it did not do this.
41. After identifying this error, HMRC referred Mr W’s case to its Discretionary SEISS Claim Governance Board who approved the decision to award Mr W SEISS grants 1, 2 and 3. HMRC told us the total amount of the three grants combined, which would be paid to Mr W, was £6,524.
42. HMRC also told us it had considered its poor complaint handling, due to its failure to identify the error it had made, and the distress it had caused Mr W, and decided to pay him £150 in recognition of this.
43. With the above in mind, we are glad to see HMRC has now identified an error it made which ultimately caused Mr W to be ineligible for the SEISS.
44. When Mr W first approached our Office, he did so with the aim of us helping him to obtain the SEISS grants, which has now happened.
45. Mr W was left without the SEISS grants for over 16 months which is what we would consider to be a long duration to experience financial hardship and the severe emotional impact he experienced. Mr W told us that he had become extremely depressed and was at risk of taking his own life. He told us that his relationships and friendships had been affected, and he had found himself in ‘serious debt’.
46. We asked HMRC what consideration it gave to Mr W’s circumstances and the impact its errors had on him. HMRC said that upon reflection, it realised it did not fully consider the impact its errors had on Mr W and as such, it had reconsidered the financial remedy it would be willing to pay to Mr W.
47. As a result of our enquiries, HMRC has told us it will pay Mr W an extra £1,000 in recognition of the impact its errors had on him, and particularly, on his mental health.
48. With the above in mind, we are glad to see that HMRC has accepted that it made errors when processing Mr W’s tax return and that it has agreed to make a total financial remedy payment to Mr W of £1,150. Mr W is content with this outcome and does not want us to pursue the matter further.
49. As such, we will take no further action.
AO
50. Mr W complains the AO did not consider his circumstances or investigate the issue he raised and that it simply agreed with HMRC’s decision. He also says that the AO did not ask him for any evidence to support his complaint nor did it explain the reasons for its decision.
51. As outlined above, Mr W has told us that he does not wish to take his complaint further as he is satisfied that by approaching our Office, we have assisted him in achieving an outcome that resolves the matter for him. He says he wants to move on from the experience and does not want to take the complaint any further.
52. As such, we will take no further action.