HMRC’s SEISS eligibility decision
12. Mr O complains HMRC has not awarded him the SEISS grants despite the fact the mistake he made on his 2018-19 personal tax return was a genuine one.
13. On 2 July 2019, Mr O submitted his 2018-19 personal tax return online.
14. On 26 March 2020, in response to the coronavirus (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.
15. Initially, the scheme covered the months between March 2020 and May 2020 but at the end of May 2020, the scheme was extended to cover earnings lost in June, July and August, from July 14 2020.
16. On 14 May 2020, Mr O applied for the SEISS, but his application was unsuccessful.
17. On 28 May 2020, Mr O contacted HMRC by telephone to discuss his unsuccessful application. The HMRC officer told him he had been unsuccessful because he entered his income under the income from ‘employment’ section, rather than the ‘self-employment’ section.
18. The HMRC officer (the officer) told him they would request his case be put forward for a technical review as the mistake was relatively common among taxpayers. The officer also encouraged Mr O to wait for the technical review to take place and said he would be contacted after this had been completed.
19. The officer said to Mr O that the regulations were changing quickly due to the scheme being rolled out as quickly as possible for the public, and they could see Mr O’s mistake was an innocent one. Finally, the officer said they assumed regulations would be changed to accommodate circumstances such as this one.
20. On 16 June 2020, Mr O contacted HMRC to follow up on the technical review of his case as he had not heard back. The member of staff he spoke to on this day confirmed his case had been escalated for a technical review but that it was not yet complete. They were also unable to say when it would be completed. The staff member also reviewed two separate HMRC systems to confirm whether the original eligibility decision was correct. They said one system confirmed eligibility while the other did not.
21. The staff member also said they would try to escalate the technical review but that they could not take any further action at that time.
22. On 22 June 2020, Mr O contacted HMRC to follow up again. He was told the review was not yet complete, and he indicated he would raise a complaint online.
23. Mr O contacted HMRC twice more on 3 July 2020 and 24 July 2020 disputing HMRC’s SEISS eligibility decision. On 7 July 2020 and 27 July 2020 respectively, HMRC told Mr O he was not eligible for the SEISS grant because his 2018-19 personal tax return did not contain income from self-employment.
24. On 24 July 2020, Mr O raised a formal complaint disputing HMRC’s eligibility decision.
25. On 4 August 2020, HMRC issued its tier one response. HMRC said Mr O did not declare income from self-employment on his 2018-19, or his 2019-20 personal tax returns, and as such, he was not eligible for the SEISS.
26. On 4 September 2020, Mr O asked for his complaint to be escalated to tier two of HMRC’s complaints process. HMRC responded on 15 September 2020 and explained it could not deem Mr O eligible for the SEISS grant as his error meant he did not declare any income from self-employment on his 2018-19 tax return.
27. HMRC also said it is unable to accept any amendments made to the 2018-19 personal tax return after 6pm on 26 March 2020. It told Mr O he should amend his tax return so that his tax affairs are in order, but that it could not take note of the amendment.
28. HMRC explained The Chancellor set out specific criteria about the SEISS and that the criteria needed to be met to qualify for the grants. HMRC said it did not have any discretionary powers to divert from the Treasury’s directions, nor was it possible to appeal the decision.
29. Mr O then contacted us, but we told him he needed to first escalate his complaint to the AO which he did on 9 November 2020.
30. The ‘Treasury Direction made under Section 71 and 76 of the Coronavirus Act 2020 (April 2020)’ says that although for the purposes of the SEISS, trading profits, and relevant income are determined by reference to a person’s tax return on 23 April 2020, it says ‘no account will be taken of any amendment made to a tax return on or after 6pm on 26 March 2020’.
31. The direction, ‘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’.
32. The ‘Treasury Direction made under Section 71 and 76 of the Coronavirus Act 2020 (April 2020)’ says a person qualifies if they meet the following conditions.
33. The person must:
· carry on a trade the business of which has been adversely affected by reason of circumstances arising as a result of COVID-19 or COVID-19 disease · have delivered a tax return for a relevant tax year on or before 23 April 2020 · have carried on a trade in the tax years 2018-19 and 2019-20 · intend to carry on a trade in the tax year 2020-21 · be a UK resident. If the person is a non-UK resident or has made a claim under section 809B of the Income Tax Act 2007, the person must certify that their trading profits are equal to or more than the person’s relevant income for any relevant tax year or years · be an individual · meet the profit conditions
34. The direction says ‘relevant tax year’ means all or any of the tax years 2016-17, 2017-18 and 2018-19, as the case may be, for which a person’s trading profit and relevant income must be determined for the purposes of the SEISS.
35. Section 5 outlines the profit conditions a person must meet to be eligible for the SEISS. The direction says:
‘5.1 The profits condition is met if: (a) where the person is not subject to the loan charge, the person meets condition A, B or C, or (b) where the person is subject to the loan charge, the person meets condition D or E’
5.2 Condition A is met if: (a) the person’s trading profits of the tax year were £50,000 or less but were more than nil, and (b) those profits are equal to or more than the person’s relevant income in that tax year
5.3 Condition B is met if: (a) the person carried on a trade in the tax years 2016-17, 2017-18 and 2018-19 (b) the average amount of the person’s trading profits of those tax years was £50,000 or less but was more than nil, and (c) the sum of those profits is equal to or more than the sum of the person’s relevant income for those tax years
5.4 Condition C is met if: (a) the person carried on a trade in the tax years 2017-18 and 2018-19 but did not carry on a trade in the tax year 2016-17, (b) the average amount of the person’s trading profits of the tax years 2017-18 and 2018-19 was £50,000 or less but was more than nil, and (c) the sum of those profits is equal to or more than the sum of the person’s relevant income for those tax years.
5.5 Condition D is met if: (a) the person carried on a trade in the tax years 2016-17 and 2017-18, (b) the average amount of the person’s trading profits of those tax years was £50,000 or less but was more than nil, and (c) the sum of those profits is equal to or more than the sum of the person’s relevant income for those tax years.
5.6 Condition E is met if: (a) the person did not carry on a trade in the tax year 2016-17 (b) the person’s trading profits of the tax year 2017-18 were £50,000 or less but were more than nil, and (c) those profits are equal to or more than the person’s relevant income for that tax year’
36. The guidance above tells us that, in the first instance, HMRC will calculate a person’s eligibility for the SEISS based on their 2018-19 personal tax return. Where a person does not qualify based on the 2018-19 personal tax return, HMRC will review the two earlier years to find an average profit from self-employment.
37. However, in this case, Mr O’s 2018-19 personal tax return contained no income from self-employment, which meant HMRC could not deem him eligible for the SEISS.
38. With all of the above in mind, because Mr O’s 2018-19 tax return did not contain the correct information to reflect his self-employed status i.e., his tax return did not contain details of income under the ‘self-employment’ section of his tax return at 6pm on 26 March 2020, he did not qualify for the SEISS.
39. As HMRC is the administrator of the scheme, it must follow the Treasury’s direction, as issued by the Chancellor. A direction is a statutory instrument, which means it carries the same effect as legislation. This means the direction HMRC must follow when determining eligibility for the SEISS carries the same weight as law.
40. Our ‘Principles of Good Administration’ says public bodies ‘must comply with the law’. In this instance, we can see HMRC appears to have acted in line with the Treasury direction and our Principles when considering Mr O’s application for the SEISS.
41. Next, we considered whether HMRC could apply discretion in any circumstances or whether it should have identified, and corrected, Mr O’s error under Section 9ZB of the ‘Taxes Management Act 1970’ (TMA).
42. As part of our enquiries, we have found that HMRC does have limited discretion for the purposes of the SEISS. HMRC has provided us with its internal guidance which sets out the instances in which HMRC can refer a SEISS case to a discretionary board for consideration.
43. We can see from HMRC’s ‘Discretionary SEISS Claim Governance Board Submission Form’ the criteria that must be met for HMRC to consider the exercise of discretion. The form tells us that there are only four criteria which would cause HMRC to refer a case to its discretionary board. The form lists the criteria as:
· A HMRC error or process put in place for HMRC’s administrative convenience which is causative (in the sense that the taxpayer would have qualified for the SEISS but for the error or process) and is demonstratable by evidence · There is detrimental reliance – having relied on the online eligibility tool, the taxpayer is now worse off than they would have been had HMRC told them they were ineligible at the outset and this is demonstrable by evidence · The taxpayer who would otherwise be eligible was in a geographical location so remote that:
(i) they could not be aware either of the SEISS or of the need to comply with the deadlines in the scheme (ii) they were unable to comply with the deadlines and it would not be reasonable to have expected them to have made a provision to comply before going to the remote region.
· All the following criteria are 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.
44. From the evidence available to us, we can see HMRC was not able to refer Mr O’s case to its discretionary panel as he did not meet the criteria set out in this internal guidance. Our ‘Principles of Good Administration’ says public bodies ‘should follow their own policy and procedural guidance, whether published or internal’. In this instance, we can see HMRC has followed its guidance.
45. Next, we considered whether HMRC could have exercised its powers, under section 9ZB of the TMA, to amend a tax return in order to correct ‘obvious errors or omissions’, when it received Mr O’s personal tax returns.
46. As HMRC adopts a ‘process now, check later’ policy when it receives tax returns, it can check and amend obvious errors using its powers under section 9ZB of the TMA, at any point during the nine months following receipt of a tax return.
47. When tax returns are submitted online, there are a few basic checks as figures are entered, but there is no guarantee the return is correct.
48. When tax returns are submitted by paper, a HMRC officer will put the information contained on the tax return onto HMRC’s online system. During this process, it is possible HMRC may identify an ‘obvious error’ and correct it.
49. This means that because Mr O submitted his tax returns online, there would be no checks at the point of submission where an ‘obvious error’ may have been identified.
50. 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 details contained within a tax return are correct.
51. Despite this, in the interests of clarity, we have also considered whether Mr O’s error was an obvious one and whether HMRC should have picked up on it at any point following the submission.
52. HMRC has provided us with copies of Mr O’s tax returns. We can see from the tax returns that Mr O entered the amount of income received, the tax deducted, and an employer’s name. In the PAYE tax reference box Mr O entered the word ‘none’.
53. On the self-employment pages of his tax return, Mr O only wrote his trade description, ‘Bricklayer’ and the date his accounts were made up to.
54. In this instance, Mr O’s error was recording his self-employed income under the employment section of his tax returns. However, this is not an obvious error HMRC would identify at any point in time because the inclusion of information under the employed section, with a PAYE reference being absent, does not constitute an obvious error.
55. Examples of obvious errors include mathematical errors such as carrying forward incorrect numbers from one box to the next; where tax declared exceeds the pay figure; missing pensions, interest or dividend income.
56. We also consider that recording ‘Bricklayer’ and a date on the self-employed page of the tax return is also not an obvious error HMRC could identify. This is because a taxpayer may record themselves as self-employed with zero income on a tax return if they want to preserve their record of self-employment while working for somebody else, or for other reasons.
57. With all of the above in mind, we are satisfied there are no indications of a service failure in relation to the way HMRC determined Mr O’s eligibility, or the fact it did not refer his case to its discretionary panel for consideration. We also consider that Mr O’s error was not an obvious one that HMRC could have identified.
58. Therefore, we consider HMRC has acted in line with the Treasury direction as set out, as well as its own internal policy and our Principles.
59. As such, we will take no further action.
HMRC misinformation
60. Mr O complains HMRC told him during telephone conversations that he would be eligible for the SEISS grant, only to be told he was not eligible following a technical review.
61. As referenced earlier in this decision form, when Mr O spoke with HMRC on 28 May 2020, he was told by the officer the regulations may change to accommodate the mistake Mr O had made because it was a common one.
62. The second member of staff Mr O spoke to, on 16 June 2020, referred to two internal systems showing them conflicting information as to whether Mr O was eligible for the SEISS or not.
63. Given the fact the scheme was rolled out quickly in response to the ever-changing landscape of the COVID-19 pandemic, rules and regulations surrounding COVID-19 related schemes such as the SEISS were changing frequently.
64. When considering the evidence available to us, we note that the HMRC staff members who spoke to Mr O on 28 May 2020, and 16 June 2020, raised his expectations that he would be deemed eligible for the SEISS grant.
65. Understanding the nature of the time when these conversations took place, we consider this information was given in an attempt to give Mr O hope.
66. HMRC’s Charter says it will give customers ‘accurate, consistent and clear information’.
67. By telling Mr O they assumed the regulations would change, that people in his situation would become eligible for the SEISS, and therefore effectively pre-judging its technical review; we consider there are indications the staff Mr O spoke to did not manage his expectations and unfairly raised his hopes. This is an indication of a failing.
68. We can also see that Mr O raised this issue of misinformation as part of his complaint, but HMRC did not comment on this fact or attempt to put it right.
69. Under HMRC’s complaint handling guidance, ‘Dealing with complaints: Checklist for preparing replies to complaints’ it says HMRC should check to see if it has answered all the points in the complaint. We can see from the evidence available to us HMRC did not do this which is an indication of a failing.
70. When Mr O escalated his complaint to the AO, he asked the AO to consider this misinformation he was given. In its final report on 27 January 2021, the AO upheld this aspect of Mr O’s complaint and recommended HMRC apologise and pay him £50 in financial remedy. This was because not only had HMRC not managed his expectations during the two calls mentioned above, but it also did not address these issues when he raised it during the complaints process with HMRC.
71. When determining remedy, the AO uses HMRC’s ‘Complaints and Remedy Guidance’.
72. Under this guidance it says ‘payments we make under our complaints policy are not designed to enrich the customer or otherwise lead to advantage. In short, a customer should be no better off when compared with the position they would have been in had we not made the mistake.’
73. When considering whether an indicated failing has been put right by a public body, we refer to our ‘Severity of Injustice Scale’. ‘Level 1’ of this scale indicates in instances where we consider the person affected has experienced a one-off incidence of distress, worry, annoyance or frustration that is short lasting, an apology is enough to put things right.
74. We do not usually expect a financial remedy to be offered in instances such as this but, our ‘Level 2’ includes a range of financial remedy starting at £100. This means in some instances where we do not consider an apology on its own is enough, but the impact on the person affected does not fall into ‘Level 2’, a financial remedy of up to £100 may be appropriate.
75. Mr O has told us the whole experience has affected him financially and mentally. He says he felt depressed because he was not working due to the pandemic, so had no income. HMRC had told him he would be eligible after a review, which turned out not to be the case and while HMRC was handling his complaint it took several months, and he did not think HMRC seemed to know what it was doing.
76. In this case, we can see Mr O was told in May 2020 his case would be escalated for a technical review and he was given the false hope HMRC’s eligibility decision could change. However, after being given this false hope, Mr O was told on 7 July 2020 he could not be considered eligible for the SEISS due to the error he had made, and the deadline for accepting amendments for the purposes of the SEISS.
77. We consider this period of less than two months to be of a short duration. We appreciate the frustration and distress Mr O must have felt once he found out, in July 2020, essentially for a second time, he would not be deemed eligible for the SEISS. However, as outlined earlier in this statement, HMRC must follow the Treasury direction as law.
78. With this in mind, we consider the impact of HMRC’s misinformation and the fact it did not address this in its tier one or tier two complaint responses to fall within ‘Level 1’ of our ‘Severity of Injustice Scale’.
79. From the evidence available, we can see HMRC carried out the AO’s recommendation and wrote to Mr O on 10 February 2021. In this letter, HMRC apologised to Mr O for the way it handled his complaint and confirmed it would pay Mr O £50 within 28 days of the letter. We think this is appropriate and enough to put things right for Mr O.
80. As such, we will take no further action.