GLO-BALL GROUP LIMITED v THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS

The burden of showing that the assessments are valid in time assessments which have been properly served on the appellant, rests with HMRC. They must establish these on the balance of probabilities. They have done so. The appellant has not challenged the validity of the assessments nor denied that it had received them. Having considered the evidence, it is our view that these are valid in time assessments which were properly notified to the appellant.

The burden then shifts to the appellant to show that it is more likely than not that it has been overcharged by the assessments.

During the period of the enquiry and, we suspect, at the ADR meeting, the appellant has raised a number of issues including; how difficult the legislation is to follow, the fairness of HMRC’s enquiry and behaviour, the correctness of the HMRC team assigned to deal with the enquiry, the lack of information available, and the fact that the appellant is exactly the sort of person for whom the Scheme was intended to benefit.

When it came to the hearing, however, it was clear that Michelle and Sam appreciated that the jurisdiction of the tribunal was limited to an exploration of the facts and the application of the law to those facts. We have no jurisdiction to consider the fairness of the legislation or of HMRC’s behaviour. We can only consider whether, in short, Michelle’s social media posts comprised work. In consequence of this, their submissions to us were as follows:

Michelle’s social media posts did not comprise work which they saw as something which was the provision of a personal service for a reward in money or benefit. In lockdown the business received no income and so neither it nor either of them received any reward or benefit from those posts.

There is a difference between working and posting things on social media, and not working and posting things on social media. Before and after lockdown, they posted Facebook content on a regular basis which took a considerable length of time. These postings could amount to 20 or 30 a day. However, during lockdown those postings were much reduced and restricted to perhaps one every two or three days. In these circumstances it is disproportionate to recover or tax on all of the support payments, even if those postings did comprise work.

The Scheme was intended to benefit businesses like the appellant whose income dropped to zero during lockdown.

No events were put on, or services provided, during lockdown.

They and the appellant have at all times tried to abide by the relevant rules and legislation, which were difficult to follow and were constantly changing.

If the appellant is found liable to pay the assessments, this will cause considerable financial hardship.

On behalf of HMRC, Mr Davison submitted as follows:

Michelle was not a furloughed employee. To be so, she was not allowed to undertake any work in her role as an employee of the appellant, which included providing services, generating revenue and social media management. Furthermore, she had not ceased work in relation to her employment for 21 days or more by dint of the social media posts, and thus the costs of employment claimed in respect of Michelle were not qualifying costs.

These social media posts were not undertaken by Michelle to “fulfil the duty or obligation arising out of an Act of Parliament” which can be disregarded when considering whether someone has undertaken work.

Whilst work is not defined in the Coronavirus Direction it should be viewed in the context of section 4 of the Income Tax (Earnings and Pensions Act) 2003 and so should be seen as an employment under a contract of service or any activity under an employment for their employer or a connected party.

The relevant guidance in force at the time of the appellant’s claims stated that an employee could not undertake work for or on behalf of an organisation which “includes providing services or generating revenue…….”. Furthermore, guidance which was extant on 22 April 2020 dealt with furloughed directors and indicated that they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provide services to on behalf of their company.

Michelle’s activities of posting content on social media pages and undertaking social media management, which engaged with the appellant’s customers and sought new opportunities to increase reach and visibility comprised work for the purposes of the Coronavirus Direction. The result of this is that the costs of Michelle’s employment did not relate to payment of earnings to Michelle as she was not furloughed.

We have no hesitation in agreeing with Sam and Michelle that the Scheme was designed to assist precisely the sort of business that they run. When coronavirus and lockdown hit, many people’s income was suddenly reduced to nothing. So, broadly speaking, the purpose of the Scheme was designed to compensate qualifying businesses for the income that employees were no longer able to generate as a result of lockdown. It also enabled the employers to retain employees and pay them up to (initially) 80% of their salary subject to a cap of £2,500. So, both employer and employee benefitted. But in order to obtain and retain this benefit both employer and employee had to fulfil a number of legal requirements. So, it is not enough to say that the Scheme was designed to assist the appellant’s sort of business. It could only benefit from the Scheme if it complied with the detailed provisions of the legislation.

In broad principle the Scheme was designed to provide compensation to employers in circumstances where the employees were undertaking no work for the employer. Such employees needed to be “furloughed employees”. And initially, during the classic period, this was an absolute condition. It was the quid pro quo for the compensation. The Government would pay compensation to replace the money earned by the employees but did not want the employer benefiting twice by virtue of the employee continuing to work. So, unsurprisingly, a condition of the payment of compensation was that the employee undertook no work for the benefit of the employer at all.

The crux of this appeal is whether Michelle was a furloughed employee during the relevant periods. To be a furloughed employee she must fall within the definition in paragraph 6 of the Coronavirus Direction. HMRC accepts that the email of 28 April 2020 sent by the appellant to Michelle fulfils the paragraph 6.1 (a) condition. So, the focus of the discussion is whether Michelle had ceased (or will have ceased) all work for the appellant for 21 calendar days or more.

The phrase “all work” seems to us to have both quantitative and qualitative elements. It is our view that even a single piece of work undertaken by an employee during the relevant period means that that employee cannot be a furloughed employee because he or she has not ceased “all” work.

The appellant has suggested that if Michelle’s activities comprise work then because they had been considerably scaled down below the level undertaken pre-lockdown, only a proportion of the support payments should be clawed back. We do not consider that the legislation works like this. It is all or nothing. If there is a single piece of work, HMRC are entitled to clawback the overpayments in full.

This might seem to the appellant both unfair and disproportionate. But we have no jurisdiction to consider the fairness of legislation, and the concept of proportionality does not, in our view, apply to these charging provisions (although it does apply to any penalties which HMRC might seek to visit on the appellant).

So, the outcome of this appeal depends on whether the activities undertaken by Michelle in posting content on Facebook comprised work for the purpose of paragraph 6 of the Coronavirus Direction.

There is no definition of work in the legislation. Before us, HMRC argued that it could be taken as meaning any employment under a contract of service or activity under an employment for their employer. The relevant HMRC guidance states that the employee should not provide services or generate income for the business.

Whilst these are useful general pointers (and without wishing to provide a definition of work without having had this fully canvassed by represented parties) it is our view that in the context of the Coronavirus Direction, any activity undertaken by an employee with the view to either directly or indirectly generating income for an employer, or to enhance the employer’s goodwill (brand value) or reputation, comprises work. It does not matter whether the activity actually generates income, what is important is that the activity is intended to generate income. This can be direct or indirect. Marketing activities which may not directly generate income (and judging the commercial worth of marketing activities is the most imprecise of sciences) comprise work. Indeed, many organisations of modest size employ either in-house or outsourced, the services of marketing experts.

We also need to adopt a purposive approach towards interpreting the legislation. The purpose of the Scheme as implemented by the Coronavirus Directive was essentially to require employees to completely cease the work that they had been hitherto undertaking for an employer. So, any continuation of the activities that had been undertaken prior to lockdown is likely to comprise work even though the scale of those activities might have been considerably reduced. An employee who was turning out 100 widgets a day would still be working if they turned out only 3 widgets a day. The Scheme was designed to ensure the compensation was provided only if that employee ceased producing widgets completely.

The foregoing analysis clearly applies only to the classic period, and not to flexible furlough. This revised regime reflects the Government’s recognition that payments might be made to “top up” the income generated by employees rather than to replace that income altogether. And so the employees were entitled to work subject to certain conditions. However, it could only apply in respect of employees who qualified under the classic regime.

Tested against this interpretation, we have come to the conclusion that the vast majority of posts that Michelle made on Facebook comprised work, and in each of the periods in which support payments were claimed, she had not ceased all work for the appellant for a period of 21 calendar days or more.

In our view they are all designed to maintain and enhance the goodwill of the appellant’s business and to maintain its brand awareness even though the appellant was not able to put on the activities which it had undertaken prior to lockdown.

This is wholly understandable. What business would not wish to maintain its reputation during this difficult period so that once the situation returned to normal, the business could start to generate income. So, positioning oneself to do this, during lockdown, is a no-brainer.

But the concept of work, in our view, does not distinguish between work which might have an immediate impact on revenue generation and activities which might have an impact on the ability of a business to generate revenues in the future. Both activities comprise work.

So, there is a tension between the commercially sensible and prudent course of ensuring that a business is fully prepared to go back into the market once lockdown finished, on the one hand, and complying with the provisions of the Scheme on the other.

On 31 March 2020, the Glo-Ball Facebook page states “okay all you lovely people locked up in isolation, we need your help to spread the Glo-Ball word. So, let’s do a COMPETITION….” The post goes on to say that if a customer likes the page, they will be given an entry into the draw and furthermore, entering the draw would have an impact on the “likes”, and will “really help us grow our audience which will be so crucial to our business when we come out of lockdown”. This is clearly work. It is marketing and positioning of the business so it is better able to get back to normal once lockdown ends.

The posts in March and April 2020 relating to the holding of virtual mini disco are work in the same way that advertising and reporting back on activities which had formally been undertaken at a village hall was work. And just as the posts advertising the competition and asking for customers to post “Facebook likes” was marketing and positioning and thus work, the same is true of the post on 14 April 2020 thanking customers for posting those likes and telling them that the competition was closed and that the winner would be drawn and announced.

So too was the post on 28 April advertising that Michelle had undertaken further training, the subliminal if not overt message being that once lockdown was finished, the appellant was even better qualified to undertake the pre-lockdown activities that it had been pre-lockdown. The same subliminal if not overt messaging applies to the posts in May asking customers to vote in favour of the appellant in respect of its nomination for an award. The relevant post on 24 May dealing with the competition goes on to say “in this current climate it would be superb to win an award for Glo-Babies for all the [illegible] we have delivered and from all the people that have loved what we do. It would certainly give us such a boost when we can finally restart”.

And so too with other posts, towards the end of the lockdown period, explaining how, once lockdown finished, post lockdown classes would be organised. For example, a post on 6 June 2020 asked customers to complete a survey to add their opinions as to how and when the customer would be satisfied to return to children’s classes which will help shape procedures which should be put in place for a safe return.

We find that in each of the periods March 2020 to June 2020 Michelle’s posts did comprise work. It cannot therefore be said that she had ceased all work for a period of 21 consecutive days in those periods. And because she was not a qualifying employee in the classic period, she could not be one under the flexible regime until the start of November 2020. But during the period of the November claim, Michelle carried out classes, which were clearly work. And so, in our view, Michelle was not a furloughed employee in any of the periods in question.

Finally, we wholly appreciate that this decision will cause the appellant financial hardship. The only crumb of comfort that we can offer is that we suspect this financial hardship will be less acute than would have been the case had the support payments not been made to the appellant in the first place. At least now the appellant is able to generate income which might go some way towards satisfying the assessments.

For the foregoing reasons we dismiss this appeal.

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.