Case Number: TC09633
By remote video
Appeal reference: TC/2024/16635
Keywords CORONAVIRUS JOB RETENTION SCHEME - Whether claims for payments under the CJRS were correctly calculated - no - Appeal dismissed.
Judgment date: 12 September 2025
Before
TRIBUNAL JUDGE DAVID HARKNESS
JANE SHILLAKER
Between
DAPETZ LIMITED
Appellant
and
THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS
Respondents
Representation:
For the Appellant: Mr Siddiquallah Saleem, a Director of the Appellant
For the Respondents: Miss Perry Lucas, litigator of HM Revenue and Customs Solicitor’s Office
DECISION
Introduction
The hearing took place on 1 July 2025 using the Teams Video system. The documents to which we were referred were a bundle of 1315 pages. Mr Saleem gave evidence in person. Miss Alison Walker, a compliance officer at HMRC, gave witness evidence.
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.
Summary
The appeal concerned three assessments (the “Assessments”) to income tax made in respect of an amount of Coronavirus Support Payments (“CV Support Payments”) paid to the Appellant under the Coronavirus Job Retention Scheme (“CJRS”). The Assessments were in respect of tax years 2020-21 and 2021-2 in the amounts of £112,286.44, £13,229.81 and £56,005.68, being a total amount of £181,591.56.
The central question before us was whether the Appellant had correctly calculated its claim for CV Support Payments in accordance with the Coronavirus Act 2020 and regulations made under that Act (in particular paragraph 7 of the First Coronavirus Direction (the “Coronavirus Direction")). We determined that the Appellant had not correctly calculated their claim in accordance with the Coronavirus Direction and that HMRC were correct to make the Assessments.
Following a review of the Assessments, HMRC had invited the Tribunal to adjust the Assessments to a total of £177,401.27. Accordingly, the Tribunal decided to use our powers under section 50(6) Taxes Management Act 1970 (“TMA”) to reduce the Assessments for tax year 2020-21 to £112,269.78 and £12,987.45 and for tax year 2021-22 to £52,144.04, being a total or £177,401.27.
We dismissed the Appellant's appeal in respect of the Assessments.
We were sympathetic to the Appellant in that it had made claims for CV Support Payments on the understanding the claims were in line with the applicable rules and had accounted to their furloughed employees for the amounts received. Now having to repay amounts meant the Appellant would lose out when it had not ultimately benefited from the payments. We considered that the Appellant had probably made an innocent mistake. However, our conclusion was that the claims were not made in accordance with the rules and that we did not have jurisdiction to consider the arguments raised by the Appellant (such as issues of legitimate expectation and compliance by HMRC with the HMRC Charter).
We accepted that the efforts made by the Appellant in the pandemic had contributed to the wellbeing of the United Kingdom and noted that the Appellant had said this had been commended by the King. However, that did not give us grounds to find in the Appellant’s favour in relation to this appeal.
Background and findings of fact
We found the following facts which were not disputed:
The Appellant is a company which has been trading since 2014 and sells a wide variety of goods, including DIY products, gardening equipment and PPE.
Most sales are on-line but there is a trade counter that sells in person. In early 2020, orders for PPE started being received in numbers from China. This was a surprise because normally the appellant imported products from China rather than exporting products to China.
The business became extremely busy and it was necessary both to take on additional staff and from 1 March 2020 to pay extra salary to existing staff to retain and motivate them. Matters were particularly complicated for Mr Saleem at that time because the business was moving premises and Mr Saleem’s partner had recently had a baby.
In addition, some of the existing staff refused to come to work (for understandable reasons because of the pandemic) so Mr Salim had to furlough them and take on alternative staff to ensure that the business kept running. He was determined that it should remain operational since it was delivering vital PPE during a time of national crisis.
The Appellant made claims for CV Support Payments in respect of furloughed employees. These claims were accepted at the time by HMRC without question.
However, nearly two years later, on 14 December 2021, HMRC opened an inquiry into the claims. There followed an exchange of correspondence in which the Appellant supplied the information HMRC requested. Subsequently on 14 June 2023 HMRC issued the Assessments on the basis that the claims were excessive.
The Appellant appealed to HMRC in respect of the Assessments. The Appellant subsequently requested an independent review and a number of exchanges followed which culminated on 25 October 2023 with HMRC issuing a review conclusion letter (the “Review Letter”) varying the Assessments to the amount of £177,401.27 referred to at [5]. The Appellant then appealed to the Tribunal. The Appellant and HMRC attempted ADR but this was unsuccessful, hence the matter came before this tribunal.
The Appellant is a Real Time Information employer which made claims for CV Support Payments in respect of 15 employees.
Of these 11 were fixed rate employees in respect of whom the Appellant had claimed CV Support Payments using a reference salary which was not the reference salary shown on a “Real Time Information Return” (“RTI return”) made on or before 19 March 2020 whereas HMRC’s calculations used for the purposes of the Assessments were made by limiting the reference salaries to salaries shown on an RTI return made before 19 March 2020;
One was an employee who was not included on an RTI return made until 5 March 2021;
One was an employee first employed on 1 October 2020 who was not a fixed rate employee; and
Two others were employees who were not fixed rate employees.
The calculations in the Review Letter were correctly made.
Points at Issue
The issues before the tribunal were:
Whether the Assessments are correct, competent and in time; and
Whether the Appellant satisfied the conditions of the Coronavirus Direction. This requires determination as to whether paragraphs 5, 7 and 8 are satisfied, which set out requirements the Appellant needed to fulfil to claim for CV Support Payments.
HMRC did not challenge the Appellant's eligibility as a qualifying employer.
Burden of Proof
HMRC bears the burden of proving the Appellant did not satisfy the conditions of the Coronavirus Direction and is liable to an income tax charge under paragraph 8 FA 2020, as assessed under paragraph 9.
The burden is on the Appellant to prove it has been overcharged by the assessment.
The standard of proof is the ordinary civil standard, on the balance of probabilities.
Grounds of appeal
Arguments from the Appellant
The Appellant did not dispute HMRC’s calculations which underpinned the Assessments in the Review Letter (which accordingly we found as a fact to be correct). Rather the essence of the Appellant’s appeal was that:
They had followed all filing requirements and information requests from HMRC and provided calculations to the best of their ability and knowledge, including during the pandemic, when they and their employees were fighting for their lives;
All their claims had been made in time;
Their claims to CV Support Payments were in the spirit of the CJRS;
HMRC had not followed their charter (under Finance Act 2009);
HMRC had a duty of care to the Appellant which had not been fulfilled;
HMRC should have put in place a system at the time CV Support Payments were introduced so that claims that were not in line with the detailed rules were automatically flagged/rejected at the time rather than the system being a retrospective investigation which only started in December 2021 (nearly two years after the claims) and did not finish until nearly two years after that on 25 October 2023;
HMRC had themselves made mistakes in calculating the Assessments and had been allowed to correct them in the Review Letter, yet similar indulgence had not been extended to the Appellant;
In performing their investigation of the matter, there had been frequent changes of HMRC caseworker which had caused delays;
The Appellant had a reasonable expectation that the CV support payments which had been claimed would not be reclaimed in all the circumstances.
Arguments from HMRC
HMRC argued that the CJRS was established to provide Support Payments to employers on a claim made in respect of costs of employment of furloughed employees arising from the coronavirus pandemic. The scheme allowed a qualifying employer to apply for reimbursement of the expenditure incurred by the employer in respect of the employees entitled to be furloughed under the scheme.
Sections 71 and 76 of the Coronavirus Act provided the Treasury with the power to direct HMRC's functions in relation to coronavirus. Pursuant to these powers, the Treasury introduced the Coronavirus Direction to govern HMRC's administration of the CJRS on 15 April 2020 (subsequently followed by several updated Directions in relation to CJRS during the pandemic).
Paragraph 8 Schedule 16 FA 2020 provides that recipients of CV Support Payments are liable to income tax if they were not entitled to a CV Support Payment that they received. The amount charged (by way of assessment) is equal to the amount of support payment to which the applicant was not entitled.
Under paragraph 9(1) Schedule 16 FA 2020, when an Officer of Revenue and Customs finds that a person has received an amount of coronavirus support payment to which they are not entitled the Officer may raise an assessment.
HMRC argued that, having checked the information held on HMRC's RTI system and having considered evidence and information provided by the Appellant, Officer Walker identified that CJRS claims had been made that were based on amounts that exceeded the qualifying costs in respect of which the Appellant was entitled to claim.
HMRC submitted, based on the testimony of Officer Walker contained within her witness statement, that Officer Walker's opinion was formed in consideration of the relevant evidence and that her conclusion was a reasonable one and accordingly that the assessments were issued to the Appellant correctly under paragraph 9 Schedule 16 FA 2020 within the applicable time limits provided under s 34 TMA.
Legal Background to CV Support Payments
There was no apparent difference between the Appellant and HMRC as to the underlying legal position, so we have stated it fairly briefly as follows.
HMRC accepted that the Appellant was eligible to make CJRS claims but contended that the calculations for the claims made to CJRS by the Appellant were wrong and gave rise to an overpayment of CJRS.
The costs of employment in respect of which a claim may be made is set out in Paragraph 5 of the Coronavirus Direction. These are costs which 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 meet the conditions in paragraphs 7.1 to 7.15”
A “relevant day” is defined by paragraph 13.1 of the Coronavirus Direction as 28 February or 19 March 2020. Paragraph 5 of the Coronavirus Direction refers to Schedule A1 to the PAYE Regulations. Paragraph 67B of the 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”. The Appellant accepted that the relevant day for it was 19 March 2020.
Schedule A1 details what information regarding payments to employees must be given to HMRC. This information includes the date of the payment made and the employee’s pay frequency.
Paragraph 6 of the Coronavirus Direction defines a furloughed employee as follows:
“(a) The employee has been instructed by the employer to cease all work in relation to their employment, (b) The period for which the employee has ceased (or will have ceased) all work for the employer is 21 calendar days or more, and (c) The instruction is given by reason of circumstances arising as a result of coronavirus or coronavirus disease.”
Paragraph 8 of the Coronavirus Directions sets out what expenditure can be reimbursed through a CJRS claim and makes reference to an employee’s “reference salary” and refers to paragraphs 7.1 to 7.15 of the Coronavirus Direction.
Paragraph 7 of the Coronavirus Direction explains qualifying costs and at paragraph 7.2 states:
“Except in relation to a fixed rate employee, the reference salary of an employee or a person treated as an employee for the purpose of CJRS by virtue of paragraph 13.3 (a) (member of a limited liability partnership) is the greater of (a) The average monthly (or daily or other appropriate pro-rata) amount paid to the employee for the period comprising the tax year 2019-2020 (or if less, the period of employment) before the period of furlough began, and (b) The actual amount paid to the employee in the corresponding calendar period in the previous year.”
These two methods are known colloquially as the average and the lookback method respectively.
Paragraph 7.3 of the Coronavirus Direction states that:
“In calculating the employee’s reference salary for the purposes of paragraphs 7.2 and 7.7, no account is to be taken of anything which is not regular salary or wages.”
Paragraph 7.4 defines “regular salaries or wages” as so much 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.”
Accordingly, an employee’s “reference salary” should be calculated with reference to one of two tests set out in the Coronavirus Directions depending on whether the employee is a fixed rate employee or not. For an employee who is not a fixed rate employee, either the average or the lookback method should be used. A fixed rate employee is defined in paragraph 7.6 of the Coronavirus Direction as follows: “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.”.
Paragraph 7.7 of the Coronavirus Direction goes on to provide that “The reference salary of a fixed-rate employee is the amount payable to the employee in the latest salary period ending on or before the 19 March 2020 (but disregarding anything which is not regular salary or wages as described in paragraph 7.3).
Accordingly, if the claim is made in respect of a fixed-rate employee, the qualifying costs on which CV Support Payments are based are determined by the earnings shown on an RTI return which is made on or before a day that is a relevant CJRS day (which the Appellant accepted for it was 19 March 2020).
It will be readily apparent that if a fixed rate employee’s salary was increased in early 2020, the effect of the Coronavirus Direction is to produce a very different result depending on whether the increase is shown in the employer’s monthly RTI before, or after, 19 March 2020. If it was before, the reference salary would be the increased salary; if after, the reference salary would be the lower salary. For an employer in the position of the Appellant, which had given salary increases on 1 March which would show up on an RTI after 19 March 2020, the effect of the Coronavirus Direction was to produce an unfortunate result.
It was accepted by the Appellant that certain of its employees in respect of whom claims for CV Support Payments had been made were fixed rate employees and certain were not.
By a direction (the Seventh CJRS Direction) made on 15 April 2021 the Coronavirus Support Scheme was extended to employees in respect of whom payments were reported to HMRC on an RTI return after 19 March 2020 and before 3 March 2021 (paragraph 6.2 of that direction).
Application of those rules to the Appellant
HMRC submitted that in their calculations for the purposes of the Assessments, for fixed rate employees they applied the reference salary in accordance with paragraph 7.7 of the Coronavirus Direction. For employees who were not fixed rate, HMRC used the lookback method where that was more beneficial to the Appellant. For all employees, HMRC submitted they had applied the rules as set out in the applicable Directions.
The revised calculations by HMRC were set out in the Review Letter. In summary HMRC had used as the reference salary for fixed rate employees the amount payable to the employees shown on the latest RTI return made before the relevant CJRS day (19 March 2020). For employees who were not fixed rate, HMRC had used the lookback method where this was most beneficial to the Appellant. In respect of one employee not shown on an RTI return until 5 March 2021, HMRC had denied the claim for a CJRS Payment in accordance with the Seventh Coronavirus Direction. In respect of one employee first employed on 1 October 2020, HMRC had used the applicable calculation basis for an employee not on a fixed salary.
The Appellant did not dispute the calculations made by HMRC in the Review Letter. Accordingly, we determined that HMRC’s calculations in the Assessments were correctly made and that the Appellant’s original claims were not.
Accordingly we determined that:
The calculations in the Assessments (as varied in the Review Letter) were carried out correctly and that HMRC's final conclusion reached was a reasonable one that correctly applied the provisions of the Coronavirus Direction(s);
The Assessments were raised correctly and issued in time.
We then proceeded to consider the Appellant’s arguments set out in [15]. In relation to those, we were sympathetic to the Appellant. Unfortunately, however, we did not consider these were grounds on which we could allow the appeal. Specifically:
Following all filing requirements and information requests from HMRC and doing calculations to the best of one’s ability does not mean that a taxpayer has correctly calculated their liability to tax or to CV Support Payments – the test of that is whether the calculations have in fact been made correctly;
That all their claims had been made in time is not relevant to whether the claims were correct;
We do not have jurisdiction to hear arguments as to whether the Appellant’s claim to CV Support Payments was in the spirit of the CJRS or as to the other points made by the Appellant such as whether HMRC:
have followed their Charter,
had a duty of care to the Appellant which had not been fulfilled,
should have put in place a system at the time CV Support Payments were introduced so that claims that were not in line with the detailed rules were automatically flagged/rejected at the time rather than the system that was put in place which involved a retrospective investigation starting nearly two years later;
had themselves made mistakes in calculating the Assessments and had been allowed to correct them, yet similar indulgence had not been extended to the Appellant;
had changed caseworkers in a way that had caused delays.
Similarly we do not have jurisdiction to hear arguments as to whether the Appellant had a reasonable expectation that the CV support payments which had been claimed would not be reclaimed in all the circumstances.
In relation to [42](3) and (4) there is considerable case law (e.g. the Upper Tribunal decision in HMRC v Hok Ltd [2012] UKUT 363 (TCC)) that this Tribunal is a creature of statute and has only the powers given to it by statute. The remedy for matters of the kind referred to in those paragraphs is a claim for Judicial Review or under HMRC’s complaint system. We do not have powers to rule on such matters, much as the Appellant might have liked this Tribunal to have such powers.
Accordingly, we determined that we should dismiss the appeal.
We noted in reaching this determination that the Appellant was in a nearly identical position to Laxzo Limited which is a company that Mr Saleem is involved with and which had appealed an assessment in respect of CV Support Payments. It was unsurprising to us that the outcome of this appeal was the same as Laxzo Limited’s appeal (Laxzo Ltd v HMRC [2025] UKFTT 372 (TC)). HMRC had applied on 17 June 2025 (some two weeks before the hearing) to amend their statement of case mainly to introduce points made in Laxzo and other cases relating the absence of jurisdiction for this Tribunal to consider certain of the Appellant’s arguments.At the hearing, the Appellant objected to that application but in the circumstances we did not find it necessary to determine the application since the absence of jurisdiction for us to hear certain of the Appellant’s arguments was plain to us in any event. Had we determined the application by HMRC to amend their statement of case we would have determined it in HMRC’s favour since it was consistent with the overriding objective of enabling this Tribunal to deal with cases fairly and justly.
Right to apply for permission to 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.
Release date: 12th SEPTEMBER 2025
