Flooring Limited v The Commissioners for HMRC [2025] UKFTT 526 (TC)

[2025] UKFTT 00526 (TC)Case No TC09516
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 10 February 2025Date Judgment date: 9 May 2025
By remote video hearing
Appeal reference: TC/2023/08106
Coronavirus Job Retention Scheme (CJRS) – appeal against assessment under Schedule 16 Finance Act 2020 – RTI return - reference salary - appeal dismissed
Before
TRIBUNAL JUDGE SUSAN TURNERANN CHRISTIAN
Between
KNR FLOORING LIMITEDAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentRobert Mitchell, accountant for AppellantLucy Lawrence litigator of HM Revenue and Customs’ Solicitor’s Office for RespondentsDECISION

Introduction

[1]This is an appeal by KNR Flooring Limited (KNR) against assessments to tax made by HMRC under para 9, sch 16 Finance Act 2020 (FA 2020) in respect of payments made to KNR in relation to its directors, Kenny Grant and Ryan Abbott, under the coronavirus job retention scheme (CJRS) for tax years 2020-21 and 2021-22. The assessment for the 2020-21 tax year is in an amount of £37,442.33. The assessment for the 2021-22 tax year is in an amount of £12,432.34. The total amount of the assessments under appeal is £49,874.67.[2]The CJRS was introduced in April 2020 under the Coronavirus Act 2020 to provide funding for employers who furloughed their employees during the coronavirus lockdown. The quantum of a CJRS payment is determined by reference to the amount submitted to HMRC on a company’s RTI return. There is no dispute that KNR is eligible for CJRS payments, but the quantum of such payments is in dispute.[3]HMRC claimed that the amounts received by KNR exceeded the amounts entitled to for the two directors under the CJRS and they issued an assessment to claw back the overclaimed amounts.[4]This matter was referred to Alternative Dispute Resolution (ADR) but the parties were unable to reach a resolution via the ADR process.[5]The form of the hearing was V (video) and all parties attended remotely via Microsoft Teams. We referred to a hearing bundle of 544 pages, which included HMRC’s statement of case and the witness statement of Officer Barrett, HMRC’s decision-making officer, and were also provided with skeleton arguments by both parties. We heard witness evidence from Officer Barrett and also from Mr Grant and Mr Abbott on behalf of KNR.[6]Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.

The Proceedings

[7]We received the document bundle in advance of the hearing. Although the skeleton arguments had been submitted ahead of the hearing, we had not had sight of them before the hearing started. We received the skeleton arguments towards the beginning of the hearing and are grateful to the parties for preparing them.[8]The hearing was held by video. Mr Mitchell and the two directors of KNR, Mr Grant and Mr Abbott, shared a single video link. We allowed time at the start of the hearing to ensure that Mr Mitchell, Mr Grant and Mr Abbott had sight of the hearing bundle. The giving of evidence by Mr Grant and Mr Abbott was tricky given their confined space, and, at times, there were interruptions and interjections by other parties sharing the same video link. We nevertheless proceeded to hear the appeal and enable participation in this flexible manner in the interests of fairness and justice.

Background and Facts

[9]KNR was incorporated in 2019 and has two directors, Ryan Abbott and Kenny Grant.[10]Between 6 March 2020 and 30 June 2021, KNR made 15 CJRS claims in respect of the two directors.[11]On 6 August 2021, Officer Barrett opened a compliance check to ensure that KNR had claimed the correct amount of CJRS payments and requested information. Information was provided by Mr Mitchell, KNR’s agent, on 29 October 2021. Mr Mitchell had been given authority to act on behalf of KNR on 23 September 2021.[12]On 9 December 2021, Officer Barrett requested further information in respect of the first claim period, 6 March 2020 – 5 April 2020, including details of how the reference pay was calculated.[13]On 25 March 2022, Mr Mitchell said he would enquire as to how KNR arrived at the monthly pay amount, but suggested that it would just be the owners’ decision, acting within the rules.[14]On 8 April 2022, Officer Barrett asked for a more detailed explanation, and Mr Mitchell simply confirmed that the reference pay was £2,952. By later correspondence dated 15 June 2022, he said again that the pay was within the rules and employment law but didn’t provide any detailed information.[15]On 21 June 2022, Officer Barrett emailed Mr Mitchell with reasons to support HMRC’s view that KNR had overclaimed CJRS as a result of using an incorrect reference pay figure in their calculations. In this email, Officer Barrett notes that KNR should have used the reference pay figure of £512 per month per employee as the reference pay figure used by KNR exceeded the sum indicated on the last RTI submission made to HMRC before 19 March 2020.[16]On 14 September 2022, Officer Barrett issued a pre-assessment email to Mr Mitchell as agent, stating that he intended to raise an assessment in an amount of £49,874.67.[17]On 19 October 2022, Officer Barrett issued a notice of assessment in the sum of £37,442.33 for tax year 2020-21 and £12,432.34 for tax year 2021-22 and this assessment was rejected by Mr Mitchell acting as agent for KNR on 24 November 2022.[18]By letter dated 9 December 2022, Officer Barrett issued his view of the matter.[19]On 7 January 2023, Mr Mitchell requested a review, and a review conclusion letter was issued on 20 February 2023 upholding the assessments.[20]On 16 May 2023, KNR notified this Tribunal of their appeal.[21]On 3 August 2023, KNR’s appeal was accepted into ADR and the meeting took place on 16 November 2023 without reaching a resolution.[22]On 20 December 2023, HMRC applied for further and better particulars given that the original grounds of appeal dealt with the suitability of the matter for ADR. The further and better particulars were provided by Mr Mitchell by email dated 18 January 2024.[23]On 18 April 2024, Mr Mitchell provided a voluntary response to HMRC’s statement of case dated 18 March 2024.

The Issue

[24]The is no dispute that KNR is entitled to make CJRS claims. The issue in dispute in this appeal is the quantum of the CJRS payments that KNR is entitled to claim in respect of the two directors. The Tribunal must decide:(1) whether HMRC’s assessments are correct, competent and in time; and(2) whether the conditions of the coronavirus directions, the relevant provisions of which are set out in the following section, are satisfied in determining the amount of the claim KNR is entitled to.[25]The burden of proof rests with HMRC to show that the assessments are correct, competent and in time. The burden of proof rests with KNR to prove they have been overcharged by the assessments. The standard of proof in each case is the balance of probabilities. The Law Coronavirus Act 2020

The Law

[26]Section 76 of the Coronavirus Act 2020 provided that “Her Majesty’s Revenue and Customs are to have such functions as the Treasury may direct in relation to coronavirus or coronavirus disease.” Section 71 of the same Act provided as follows:
“71 Signatures of Treasury Commissioners (1) Section 1 of the Treasury Instruments (Signature) Act 1849 (instruments etc required to be signed by the Commissioners of the Treasury) has effect as if the reference to two or more of the Commissioners of Her Majesty’s Treasury were to one or more of the Commissioners. (2) For the purposes of that reference, a Minister of the Crown in the Treasury who is not a Commissioner of Her Majesty’s Treasury is to be treated as if the Minister were a Commissioner of Her Majesty’s Treasury.”

The First CJRS Direction

[27]Pursuant to these powers, on 15 April 2020 the Chancellor of the Exchequer signed a Direction entitled “The Coronavirus Act 2020 Functions of Her Majesty’s Revenue and Customs (Coronavirus Job Retention Scheme) Direction” (the First Direction). The main body of the First Direction provided as follows:
“1. This direction applies to Her Majesty’s Revenue and Customs. 2. This direction requires Her Majesty’s Revenue and Customs to be responsible for the payment and management of amounts to be paid under the scheme set out in the Schedule to this direction (the Coronavirus Job Retention Scheme). 3. This direction has effect for the duration of the scheme.”
[28]The substance of the CJRS was set out in the schedule to the First Direction.[29]After an introduction to the CJRS and its purpose, the schedule defines qualifying employers at para 3 (essentially any employer with a PAYE scheme registered on HMRC’s RTI system on 19 March 2020). There is no dispute that KNR meets this requirement.[30]Paragraph 5 of the schedule is headed “Qualifying costs” and sets out the costs for which a claim could be made under the CJRS:
“5. The costs of employment in respect of which an employer may make a claim for payment under CJRS are costs which – (a) relate to an employee – (i) to whom the employer made a payment of earnings in the tax year 2019-20 which is shown in a return under Schedule A1 to the PAYE Regulations that is made on or before a day that is a relevant CJRS day, (ii) in relation to whom the employer has not reported a date of cessation of employment on or before that date, and (iii) who is a furloughed employee (see paragraph 6), and (b) meets the relevant conditions in paragraphs 7.1 to 7.15 in relation to the furloughed employee.”
[31]In terms of timing, para 13 of the schedule provides as follows:
“13.1 For the purposes of CJRS – (a) a day is a relevant CJRS day if that day is – (i) 28 February 2020, or (ii) 19 March 2020.”
[32]Paragraph 5(a)(i) provides that the payment made is shown in a return under Schedule A1 to the PAYE Regulations. Paragraph 67B PAYE Regulations states that “on or before making a relevant payment to an employee, a Real Time Information employer must deliver to HMRC the information specified in Schedule A1 in accordance with this regulation” and sch A1 details that the information required includes the date of the payment and the employee’s pay frequency.[33]Paragraph 8 of the schedule sets out the expenditure to be reimbursed in a CJRS claim. In particular, para 8.2(b) provides that the amount to be paid to reimburse the gross amount of earning must not exceed the lower of £2,500 per month and the amount equal to 80% of the employee’s reference salary. The reference salary should be calculated with reference to para 7 of the schedule.[34]Under para 7.3, the reference salary should not take into account anything which is not regular salary or wages, which is defined at para 7.4 as follows:
“In paragraph 7.3 “regular” in relation to salary or wages means so much of the amount of the salary or wages as- (a) cannot vary according to any of the relevant matters described in paragraph 7.5 except where the variation in the amount arises as described in paragraph 7.4(d), (b) is not conditional on any matter, (c) is not a benefit of any other kind, and (d) arises from a legally enforceable agreement, understanding, scheme, transaction or series of transactions.”
[35]The calculation of an employee’s reference salary is determined by whether such employee is a “fixed-rate” employee which is found at para 7.6 as follows:
“7.6 A person is a fixed rate employee if– (a) the person is an employee or treated as an employee for the purposes of CJRS by virtue of paragraph 13.3(a) (member of a limited liability partnership), (b) the person is entitled under their contract to be paid an annual salary, (c) the person is entitled under their contract to be paid that salary in respect of a number of hours in a year whether those hours are specified in or ascertained in accordance with their contract (“the basic hours”), (d) the person is not entitled under their contract to a payment in respect of the basic hours other than an annual salary, (e) the person is entitled under their contract to be paid, where practicable and regardless of the number of hours actually worked in a particular week or month in equal weekly, multiple of weeks or monthly instalments (“the salary period”), and (f) the basic hours worked in a salary period do not normally vary according to business, economic or agricultural seasonal considerations.”
[36]Finally, in accordance with para 7.7, the reference salary for a fixed rate employee is the amount payable to the employee in the latest salary period ending on or before 19 March 2020 (but disregarding anything which is not regular salary or wages as described in paragraph 7.3).

Subsequent CJRS Directions

[37]Paragraph 12 of the schedule to the First Direction made it clear that payments under that Direction could only be made in respect of the period from 1 March 2020 to 31 May 2020.[38]In relation to payments made in respect of later periods, further directions, issued in the same way and under the same authority, apply (together with the First Direction, the CJRS Directions). They extended the CJRS with some modifications which are not relevant to this appeal. The relevant CJRS day remains the same, ie 19 March 2020, and the legislation which defines what can be included when calculating an employee’s regular salary, remain unaltered.

Finance Act 2020

[39]Paragraphs 8 and 9 of sch 16 Finance Act 2020 provide for liability to assessment as follows:
“Charge if person not entitled to coronavirus support payment 8 (1) A recipient of an amount of a coronavirus support payment is liable to income tax under this paragraph if the recipient is not entitled to the amount in accordance with the scheme under which the payment was made. … (4) Income tax becomes chargeable under this paragraph- (a) in a case where the person was entitled to an amount of a coronavirus support payment paid under the coronavirus job retention scheme but subsequently ceases to be entitled to retain it, at the time the person ceases to be entitled to retain the amount, or (b) in any other case, at the time the coronavirus support payment is received. (5) The amount of income tax chargeable under this paragraph is the amount equal to so much of the coronavirus support payment (a) as the recipient is not entitled to, and (b) as has not been repaid to the person who made the coronavirus support payment. … Assessments of income tax chargeable under paragraph 8 9 (1) If an officer of Revenue and Customs considers (whether on the basis of information or documents obtained by virtue of the exercise of powers under Schedule 36 to FA 2008 or otherwise) that a person has received an amount of a coronavirus support payment to which the person is not entitled, the officer may make an assessment in the amount which ought in the officer's opinion to be charged under paragraph 8. (2) An assessment under sub-paragraph (1) may be made at any time, but this is subject to sections 34 and 36 of TMA 1970.”
Assessments of income tax chargeable under paragraph 8 parties’ submissions Submissions for KNR

parties’ submissions

[40]KNR invited the Tribunal to find that HMRC’s assessment was not raised correctly and that KNR was entitled to the full amount of the CJRS payments made in respect of their 15 claims.[41]In their original grounds of appeal, KNR requested that the matter be allowed to proceed for resolution via ADR relying on the following grounds:(1) HMRC’s systems for implementing CJRS recovery are technically flawed. In particular, the assessment-raising techniques are untested for fairness and objectivity.(2) KNR had legitimate expectations that they would be entitled to make CJRS claims to and did so based on the original guidance and amendments issued during the coronavirus pandemic.(3) KNR’s CJRS claims made were made correctly but have been incorrectly challenged by HMRC because of “rushed working procedures and its devised methodologies,” which led to “flawed and inflated extortionate discovery assessments on basically HMRC’s biased calculations of overpaid CJRS grants.”[42]Following the failure of ADR to reach a resolution, KNR submitted further and better particulars. Mr Mitchell also responded to HMRC’s statement of case and provided a skeleton argument to assist the Tribunal. In summary, KNR’s submissions focused on three grounds: the relevant salary to be used in calculating the CJRS payments; the calculation of National Insurance Contributions; and legitimate expectations to the CJRS payments.[43]In support of the first ground, we heard that Mr Grant and Mr Abbott’s salaries were increased from £512 per month to £2,952 per month in February 2020. Mr Grant and Mr Abbott each received £2,952 per month for months 11 and 12 (February and March) of the 2019/20 payroll, and this is the salary the CJRS payment should be based on. An RTI return was submitted by KNR to HMRC on 19 March 2020 in respect of Mr Grant and Mr Abbott, and KNR’s yearly return of all taxes due was filed by 19 April 2020, each as required by legislation.[44]In support of the second ground, we heard that the amounts paid to Mr Grant and Mr Abbott in the period reported on 19 March 2020 exceeded the £512 per month relied on by HMRC in making their assessments and that this could be shown by reference to KNR’s payment of NICs. The higher amounts were reflected in KNR’s payroll software. Mr Mitchell provided a screen shot of employee and employer NI amounts, which he says can only be reached if both employees received the higher amounts in months 11 and 12.[45]The final ground was that KNR had a legitimate expectation in applying for CJRS payments and HMRC’s assessment was based on flawed information.

Submissions for HMRC

[46]Ms Lawrence submitted for HMRC that the CJRS assessments were raised correctly and in time in accordance with paragraphs 8 and 9 of sch 16 Finance Act 2020.[47]HMRC contended that KNR made CJRS claims in respect of the two directors, as furloughed employees, that were in excess of the “qualifying costs” allowed under the CJRS Directions. They said that the reference salary should have been the salary shown on the RTI submission for the directors submitted on 19 March 2020, which was £512 per employee for the month to 5 March 2020. Their assessment was for the full amount of the overpayment in accordance with para 9, sch 16 Finance Act 2020.[48]Ms Lawrence submitted that the directors were fixed rate employees for the purposes of the CJRS Directions and that the reference salary should therefore be the amount shown on the RTI submission of 19 March 2020, which was in respect of the latest salary period ending on or before 19 March 2020.[49]HMRC argued that KNR had not submitted sufficient evidence to demonstrate that the amounts claimed as CJRS payments were based on the regular salary paid to the directors as furloughed employees in the latest salary period ending before 19 March 2020 and that they have therefore not discharged the burden on them to show they have been overcharged by the assessments.[50]HMRC submitted that the evidence relating to NIC was superfluous to the requirements of the CJRS Directions.[51]Finally, Ms Lawrence submitted that this Tribunal had no jurisdiction to consider this appeal on the grounds of legitimate expectations.

DISCUSSION

[52]The submissions of the parties focused on the level of the reference salary, the significance of the NIC amounts and the question of legitimate expectations. These were explored thoroughly during the hearing, and we discuss these below alongside the relevant submissions and evidence of the parties.

The reference salary

[53]The level of the reference salary was at the heart of this matter and we heard evidence from the two directors and Officer Barrett and submissions from Mr Mitchell and Ms Lawrence on this point. There was no dispute that the Tribunal should consider the reference salary under para 7.7 of the schedule to the First Direction as a basis for the calculation of the correct amount of the CJRS payments.[54]The reference salary used by KNR in making the CJRS claims was £2,952. KNR say that this was the gross pay for each of the directors for month 11. This is the month ending on 5 March 2020 and reported to HMRC by 19 March 2020.[55]At the hearing, Officer Barrett referred us to a document named the “Business objects report” (the Business Objects Report) which included a download of Real Time Information (RTI) and PAYE data submitted by KNR from HMRC’s internal systems. This showed payments of £512 a month to each of the two directors between tax months 7 to 11 of the 2019-20 tax year. This included the submission made on 19 March 2020 relating to the payment made for the salary month ending 5 March 2020. During the summer of 2019, some submissions of £0 were recorded. For month 12, submitted on 19 April 2020, a payment of £2,952 was recorded.[56]HMRC therefore submitted that the increase of pay to £2,952 per employee was not reported on the RTI until 19 April 2020. This would relate to the salary period ending 5 April 2020, after 19 March 2020, the latest relevant CJRS day, and therefore could not be considered in calculating the CJRS payments.[57]At the hearing, we were told that KNR was a new business. Prior to incorporating KNR, Mr Grant and Mr Abbott had carried on business as sole traders. We heard that Mr Mitchell acted as accountant for KNR, advising Mr Grant and Mr Abbott as directors with respect to financial matters. Communications with Mr Mitchell usually took place via messages and phone. Mr Mitchell confirmed they often used Facebook Messenger. As Mr Abbott worked with Mr Grant every day, such correspondence usually took place among the three of them together.[58]In the early months, the directors drew a salary from the business, and this started as a token £512 per month. As the business became more established, it was intended that the directors’ salaries would increase.[59]Mr Grant said that he and Mr Abbott continued to carry out sub-contracting work whilst seeking contracts for the new business. As soon new contracts were won, they would be able to pay themselves a reasonable wage each week. They had an apprentice each and were working to advertise their business. He says, at the beginning, they could only pay themselves what they had. They had agreed that they would get a proper wage every week once the business was on a stable footing. Mr Grant said that, sometimes, both he and Mr Abbott would take a £500 lump sum from the business, perhaps from the directors’ loan account, and discuss what their pay was to be. The £512 was just a token amount. Mr Grant explained that they had been undertaking self-employed contracts during the summer of 2019 when the KNR RTI submissions fell to £0.[60]Mr Abbott agreed that they accepted wages of £500 a week with the expectation that these payments would subsequently increase. He said that they agreed to the salary increase in around February 2020.[61]We heard that the £2,952 amount was determined based on a consideration of affordability at the time and the minimum wage. Mr Mitchell advised that it takes into account National Insurance and pension contributions. The CJRS claims were made based on this amount in accordance with the gross pay for the month ending 5 March 2020.[62]Mr Mitchell relied upon screenshots of spreadsheets extracted from KNR’s bookkeeping software in support of KNR’s position that Mr Grant and Mr Abbott had been paid £2,952 for the month ending 5 March 2019. The screenshots show multiple payments of £500, and one payment of £350, being made to each of Mr Grant and Mr Abbott during February and March 2020. The description for these payments is “items for purchase” with a reference code. Mr Mitchell told the Tribunal that the spreadsheets show that the directors were paid no less than £9,200 between them during February and March “before any other accrual considerations or receipt of CJRS grant is made.”[63]Mr Mitchell explained that any payments would be fed into a cloud accounting system by Mr Grant or Mr Abbott to be allocated by Mr Mitchell to the appropriate account. He said that where the “supplier” is Kenny / Ryan, this would be money or wages. In the early days, there were no dividends to distinguish from wage payments and the £500 per week payments were regular and uniform.[64]Mr Mitchell submitted that the figure of £512 for period 11 in the RTI data provided by HMRC was wrong and could be a software error as it did not match the amount on his internal software. He also questioned whether HMRC’s compliance check had been conducted properly and contended that KNR was not asked to provide evidence about whether wages were paid or not. Mr Mitchell told the Tribunal that no bank statements were provided because Officer Barrett had confirmed during his enquiries that he had received enough information.[65]Officer Barrett told the Tribunal that he had asked KNR to explain how the £2,952 reference salary had been arrived at on several occasions but had never been given a straight answer.[66]Ms Lawrence submitted that a document provided by KNR showing that the employees were paid £2,952 for February 2020 was taken from an internal / third party software document and did not reflect the RTI submission data held by HMRC.

The National Insurance Contributions

[67]Mr Mitchell said that there appears to be “reasonable doubt” with HMRC’s case that the RTI data contained in the Business Objects Report is accurate, in particular with respect to the payroll filings. Mr Mitchell suggested that the information used by HMRC was an Excel spreadsheet figure, which is “possibly ad-hoc” and “in house”.[68]In support of this, Mr Mitchell explained that the Business Objects Report showed that the amount of NIC due in respect of each employee matched the amount that would fall due in circumstances where pay of £512 had been made for six periods followed by pay of £2,952 for two periods and that these amounts had been declared by 19 March 2020. Mr Mitchell showed us an Employer’s End-of-Year Summary for 2019-20 which included those amounts.[69]The suggestion that the Business Objects Report had been created was strongly refuted by Ms Lawrence. Officer Barrett explained that the data was downloaded from HMRC’s systems. He acknowledged that the underlying data was not readable and said that the purpose of the spreadsheet was to make the information accessible. He told the Tribunal that each RTI submission made by KNR would be time-marked and this was the information fed into the spreadsheet.[70]Ms Lawrence submitted that the level of NIC was superfluous to what the CJRS Directions provide. In particular, she argued that NIC could have been calculated on an annual basis in month 12, which would in any event fall after the relevant CJRS day. In these circumstances, the lack of NIC due in period 11 would be correct, as no NIC would be due under the annual threshold amount.

Legitimate expectations

[71]Turning to legitimate expectations, Mr Mitchell relied on KSM Henryk Zeman SP Z.o.o. v HMRC [2021] UKUT 182 (TCC) in support of his submissions that KNR had legitimate expectations of succeeding in their CJRS claim. He argued that the legitimate expectation arose out of the peculiar circumstances of the emergency Covid-19 lockdowns and the government response, inviting CJRS claims. In particular, Mr Mitchell said that there was reasonable doubt about the application of the law by HMRC in this particular case and suggested that HMRC had acted incorrectly in raising the assessment under appeal and abused their powers during the compliance check.[72]For HMRC, Ms Lawrence submitted that the current case was quite different to that considered in Zeman and addresses materially different matters. Following Caerdav Ltd v R & C Commrs [2023] UKUT 179 (TCC), she said that the starting point is that the Tribunal is a creature of statute and does not have jurisdiction to consider freestanding public law arguments depending on the statutory provisions under consideration.[73]In this case, she submitted that the statutory provisions which apply do not allow the Tribunal to consider public law arguments. In particular, Ms Lawrence argued that s 50(6) Taxes Management Act 1970 (TMA 1970) provides that an assessment shall “stand good” save insofar as an assessment should be reduced because of an overcharge, which is clearly distinguished from Zeman where the right of appeal was against an assessment or a decision on matters relating thereto.[74]Ms Lawrence also submitted that KNR made no strong arguments in support of their legitimate expectations beyond a complaint that they were entitled to CJRS payments and that HMRC’s assessment is wrong.[75]At the hearing, KNR did not pursue arguments relating to legitimate expectation with any enthusiasm.

The DECISION

[76]Having considered all of the evidence and submissions made to the Tribunal, we find that HMRC were entitled to raise the assessment under paragraphs 8 and 9 of sch 16 Finance Act 2020 for the amounts paid to KNR and under appeal before this Tribunal based on the £512 reference salary shown in KNR’s RTI return of 19 March 2020.[77]We find that KNR have not shown, on the balance of probabilities, that they were overcharged by HMRC’s assessments. HMRC’s assessments were based on the information submitted by KNR in an RTI return made to HMRC on 19 March 2020, as required by the relevant legislation set out above.[78]We understand from KNR’s submissions that they question the validity of HMRC’s RTI data. We therefore considered with great care the submissions and evidence provided to the Tribunal in this regard.[79]During the hearing, we scrutinised the Business Objects Report. It was clear that any dispute surrounding the data contained in this report related to the 19 March 2020 submission only. Prior to this date, there had been regular payments of £512 to each of the two directors since April 2019, which were undisputed, with the exception of a series of £0 submissions for July 2019 to October 2019, which were also undisputed. For the submission dated 19 April 2020, the amount increased to £2,952 and remained at this increased level thereafter.[80]In accordance with para 7.7 of the First Direction, the reference salary is the amount payable to the directors in the salary period ending on or before 19 March 2020. We find that this amount was £512 as shown in HMRC’s Business Objects Report. Any increase in the regular salary and wages of Mr Abbott or Mr Grant was not recorded with HMRC on the RTI return by the relevant CJRS day.[81]The column of the Business Objects Report headed IP Taxable Pay Ytd increases monthly according to the amount of taxable pay received by each director. The amount following the 19 March 2020 submission stands at £3,584. The amount following the 19 April 2020 submission for each director jumps to £8,976, which, we heard is the sum of the previous month’s £3,583, plus two payments of £2,952, less a single payment of £512.[82]We heard evidence regarding the process followed by KNR to increase salary payments and understand that they would take place following discussion between the two directors and Mr Mitchell. We understand that it was usual for the business to follow relatively informal processes, and for conversations to take place via phone.[83]We accept that there was a discussion about increasing the salaries in around March 2020, and this was a fairly informal discussion. There is nothing wrong with that in itself, but there was no proof of the actual date.[84]The evidence we heard about the decision-making process was unclear and uncertain and, in the absence of any persuasive documentary evidence, insufficient to prove, on the balance of probabilities, that a salary increase did take place during February 2020 rather than March 2020 and that the information held by HMRC was incorrect. For this reason, the higher reference salary used by KNR in making the CJRS claims cannot be taken into account in calculating the eligible claim.[85]We find the evidence relating to KNR’s NICs does not prove, on the balance of probabilities, that KNR increased the two directors’ salaries to £2,952 prior to the relevant CJRS day.[86]Finally, we agree with Ms Lawrence that this Tribunal does not have jurisdiction to consider this appeal on the grounds that KNR had a legitimate expectation to the CJRS payments in the amounts received. This follows established case law found in the Upper Tribunal decisions of HMRC v Hok Ltd [2012] UKUT 363 (TCC), Abdul Noor v HMRC [2013] UKUT 071 (TCC) and Trustees of the BT Pension Scheme v HMRC [2015] EWCA Civ 713 which is binding on this Tribunal. We find that there is no exception to this under Zeman and the powers of this Tribunal are therefore limited to a power to reduce an assessment where the appellant has been overcharged in accordance with s 50 TMA 1970.[87]For the reasons set out above, we find that the assessments were raised correctly and in time and that KNR were not overcharged. We DISMISS this appeal and uphold the assessments in an amount of £49,874.67.

Right to apply for permission to appeal

[88]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 09th MAY 2025

Cited in 3 later judgments