Many farmers and agribusinesses will have been inundated with information on the various grants and loans available as part of the Government’s response to help businesses during the Coronavirus pandemic, says Mike Butler, partner in the specialist team at Chartered Accountants, PKF-Francis Clark.
Before business owners make any type of claim, it is critical that they make entirely sure that they qualify to receive the support offered.
In particular claims under the Self Employed Income Support Scheme (SEISS), the income support grant available for self-employed and partners in partnerships, requires the claimant to assess that business has had to ‘scale down or temporarily stop trading’ in order to make a claim as set out on the Government website.
Whilst many farmers may feel that there has been some impact from Coronavirus on their businesses, it important that all claimants are not only satisfied that their businesses have been sufficiently affected to warrant a claim but also they are able to justify such claims should there be later scrutiny but HMRC and other Government authorities.
The same considerations should have been given before accessing funds through the Bounce Back Loan Scheme (BBL). To make a claim, Government rules on eligibility restrict claims for funding to businesses that have been or are being ‘adversely impacted by coronavirus’.
One thing is clear. Those claiming under the Self Employed Income Support Scheme on the basis that it is a bonus or because it’s free money or those taking up Bounce Back loans because it’s cheap money should be concerned as this is not what the support is for. It is also not appropriate to make a claim to cover other trading issues unconnected with coronavirus such as the financial impact of a wet autumn/winter in 2019.
In addition, claiming a Bounce Back Loan requires the borrower to certify online that the monies are needed to cover the impact coronavirus has had or is having on their business and will not be used for unrelated reason of funding a capital project such as a new build or a new piece of machinery or refinancing an overdraft that has increased for reasons other than coronavirus. Certainly borrowing to withdraw monies for personal expenditure would not be acceptable.
There is widely expected to be a formal review process and audit of claims once we get back to some form of normality and with that comes the risk that some businesses may be found to have made inappropriate claims.
In a worst case scenario, claims could be considered fraudulent with the obvious serious implications which that may entail.
The monies received by self-employed and partners making a claim under the SEISS is taxable and will need to be reported in some form potentially on the 2020 and certainly on the 2021 Self Assessment forms.
As such, whilst we are yet to have the detail on the format for reporting this income on the tax forms, there is every possibility that the reporting will not only separately declare monies received under these types of schemes but also that the level of continuing farming income will be compared with previous years to see if the farming profits have been adversely impacted by coronavirus.
By making this comparison, HMRC may look to identify those businesses potentially making inappropriate claims for support and therefore referring them to other authorities to look into the validity of claims further.
Don’t make a claim if you are doing so just because it seems like free money or because everyone else seems to being doing it.
Many agribusinesses have been affected by this dreadful pandemic and indeed most farming sectors have seen at least some pressures and challenges.
However there are many other businesses out there in the wider business community really suffering and in virtually complete meltdown and it is clear it is for those businesses that many of the supports are aimed.
It is becoming increasingly clear that coronavirus is going to cost this country many hundreds of billions of pounds and the longer support measures last and more the scheme are taken up, the more this is going to cost the tax payer.
As such, the greater the cost, the greater the need to check if those claims are legitimate.
Add to this the likelihood that a proportion of loans may never get repaid and you can imagine there will be lots of checking and lots of post mortems further down the line.
If farmers and agribusinesses feel that they have been adversely affected and had to scale down then they should seriously consider making whatever claim they feel fits their circumstances knowing that they can substantiate their actions should they later be scrutinised.
This will include many diversified businesses but also there will be some genuine farming cases where a claim is robust.
Think very carefully before a claim and know how you will answer a later claim audit and put in place evidence justifying the claim is vital before you jump on to the Government website and make the claim.
In all cases speak with your accountant who will understand more about the risks of making an erroneous claim.
If unsure or feel you have made a claim without the risks having been pointed out then feel free to call Mike Butler on 01722 786703 or email firstname.lastname@example.org.