22. Mrs A tells us that HMRC was wrong to view her investment earnings as income and does not therefore agree with its decision to decline her access to the SEISS.
23. As described earlier, Mrs A tells us that the sum of money she had gained through an investment 18 years before, and was planning to use as life savings, was mistakenly added to her 2018 to 2019 SATR. When HMRC came to review her eligibility, it found that this sum which it considered as ‘non-trading income’ exceeded her ‘trading profits’ and for this reason it did not see she was eligible for the SEISS.
24. HMRC’s view in terms of the non-trading income, and its relationship with trading profits, appears to be correct and in line with its guidance, which says:
‘To be eligible for a grant, your trading profits must be both of the following: · no more than £50,000 · equal to or more than your non-trading income’
25. We have also considered whether HMRC should have picked up on this mistake during its processing of Mrs A’s SATR. HMRC’s internal manual Self-Assessment: the legal framework Enquiries into Tax Returns, says:
‘During the routine processing HMRC check the tax return to correct any obvious errors or omissions that come to light at that stage. Some telephone calls may be made to resolve any minor queries in order to ensure that the return is accurately processed at the first attempt. For many customers the tax return, including the self-assessment, is simply processed as submitted.’
26. From the above excerpt, we can see that HMRC can correct any ‘obvious errors’ found on a SATR, but if none are identified, it may be that the return is processed and accepted by HMRC.
27. From the evidence available to us, we understand that the sum of money was added into the ‘additional information’ page of Mrs A’s 2018 to 2019 SATR and for this reason, we do not see it is as an indication of an obvious error. This is because Mrs A was likely seen to be disclosing information about additional capital she held at the time of submitting her 2018 to 2019 SATR. This view is supported by Mrs A’s complaint papers which show the £65,939 was ultimately considered as ‘non-trading income’ by HMRC, which we will now consider in more detail.
28. Mrs A first enquired about HMRC’s decision to decline her SEISS application in May 2020, and in the months that followed she continued to appeal its decision through the complaints process. We understand the main arguments put forward by Mrs A was that the £65,939 should not be viewed as 2018 to 2019 income. This sum instead represented returns on an investment she made 18 years before, which she intended to reinvest, and this was mistakenly added to her 2018 to 2019 SATR. A point was also raised by Mrs A in October 2020 that due to the sum being reinvested, HMRC should only have considered a portion of it on her 2018 to 2019 SATR as income, rather than the whole amount.
29. HMRC replied that the sum was part of chargeable gains and Mrs A correctly declared this on her SATR on the additional information page. It says in the case of an individual, like Mrs A, chargeable gains are included in total income, and this is set out in HMRC’s internal manual. It says for the SEISS purposes, this amount is classed as non-trading income and therefore falls under the heading ‘miscellaneous income, including taxable social security income’ in its How HMRC works out trading profits and non-trading income for the Self-Employment Income Support Scheme guidance.
30. For this reason, HMRC said the sum did contribute to Mrs A’s non-trading income and this meant that she was not eligible for SEISS as this figure was greater than her trading profits. Having considered HMRC’s view, we can see it is consistent with what is set out in its guidance and internal manuals.
31. We appreciate Mrs A says HMRC should have only considered a small part of this sum as ‘gains’. This appears to be reference to the mistake she made in adding the full sum onto her 2018 to 2019 SATR, rather than a smaller proportion of it. HMRC responded by saying that it had taken and considered the information Mrs A provided on her 2018 to 2019 SATR when considering her eligibility for SEISS, and it could not now amend the detail of this SATR as it was beyond the 26 March 2020 deadline.
32. In looking at the 26 March 2020 deadline referred to by HMRC, we can see it is in relation to an update to the Coronavirus Act 2020 from HM Treasury (under sections 71 and 76 of this legislation) which notes under part 10 ‘Contract settlements and amendments to tax returns’ that:
‘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 or any contract settlement.’
33. The above piece of legislation which governs the SEISS scheme essentially says that someone must have submitted their initial tax return by 23 April 2020 to be able to apply for SEISS. However, amendments to already submitted tax returns (as in Mrs A’s case) will not be taken into consideration after 6pm on 26 March 2020.
34. HMRC tells us that this deadline is an important anti-fraud measure to ensure that it was able to tell genuine SATR amendments from those attempting to submit fake amendments, in order to exploit the SEISS scheme.
35. As such, Mrs A’s request for HMRC to disregard or amend parts of her SATR from May 2020 onward was not possible, in line with what is set out in the Coronavirus Act 2020.
36. While we appreciate HMRC appears to have been acting in line with applicable guidance and legislation in how it considered Mrs A’s SEISS application, we also understand that it does have the ability to exercise limited discretion to accept claims when the qualifying conditions have not been met.
37. HMRC’s discretionary guidance says that in very exceptional cases where HMRC error has, for example, caused someone to miss out on SEISS funding, it may decide to allow it. This guidance also says where an applicant has been compliant, has clear and strong grounds for being unable to file a SATR, and not awarding them SEISS would be unconscionably harsh, it may also allow such funding.
38. Having considered HMRC’s discretionary guidance, we do not see the above qualifying criteria applies to Mrs A’s circumstances. There is no indication HMRC made a mistake in how it considered her SEISS application and there is no evidence to suggest that Mrs A was unable to comply with the requirements due to a particular vulnerability or any other mitigating factors set out in this guidance.
39. Having carefully considered Mrs A’s complaint, we see no indications of maladministration in how HMRC considered her SEISS eligibility. We have therefore decided to take no further action in her complaint.