City Blinds Scotland Limited v The Commissioners for HMRC

City Blinds Limited (“the Appellant/CB”) appealed against a notice of assessment issued by the Respondents (“the Respondents/HMRC”), pursuant to Paragraph 9, Schedule 16, Finance Act 2020 (“FA 2020”) for the period 23 March 2020 to 31 March 2021 in an amount of £8,510.21 (“the pre ADR assessment”).

The pre ADR assessment charged Income Tax as a result of the Appellant claiming an amount of Coronavirus Support Payments (“Support payments”) under the Coronavirus Job Retention Scheme (“CJRS”) in relation to twenty employees which HMRC say it was not entitled because the Appellant failed to calculate the claims in line with paragraphs 5, 7 and 8 of the Coronavirus Act 2020 Functions of HM Revenue and Customs (Coronavirus Job Retention Scheme) Direction dated 15 April 2020 (“the Direction”) made in exercise of sections 71 and 76 of the Coronavirus Act 2020 (“the Coronavirus Act”).

The appeal was ‘late’ but HMRC had no objections to the appeal proceeding and the Tribunal (“the tribunal/we/our”) allowed the appeal to proceed.

The appeal entered into Alternative Dispute Resolution (“ADR”) and following a meeting on 16 April 2024, the Respondents updated their view to confirm that the employees’ status was as fixed rate employees and so reviewed their calculations on that basis resulting in an adjusted assessment (“the post ADR assessment”) which was the subject of the appeal, and in an amount of £12,073.51.

The Appellant does not agree with the pre and post ADR assessments as it says the assessments do not reflect 80% of the relevant employee’s wages nor does it agree with HMRC’s assertion that an underpayment in one period cannot be offset against an overpayment in another period.

We had before us a bundle of documents comprising of 1028 pages and which included a witness statement by the Respondents’ Officer Scott Cann (“SC”), a supplementary bundle of documents containing case law of 99 pages and a skeleton argument for the Respondents dated 6 August 2025. Submitted 24 hours prior to the hearing, we were sent a brief statement of agreed facts and issues, a list of documents and a ‘Statement of Case for the Appellant’, which included schedules of what it considers to be the correct calculations of the Support payments which in the digital version comprised of 33 pages.

We heard evidence from SC who was a credible witness and who was examined on his witness statement and gave further detail on how he had made the calculations underpinning the assessments

The Appellant was incorporated on 24 March 2017 and manufactures and supplies blinds. Its director is Mr Kevin McGee, who was also appointed on 24 March 2017.

The Appellant made a total of 5 claims (“the 5 claims”) to CJRS as follows:

The total amount claimed was £104,534.70 and HMRC say that amounts which are overclaimed total £12,073.51, resulting in a ‘correct ‘figure of £92,461.19, taking no account of any offset. HMRC say the amounts ‘not claimed’, or under claimed, total £8,589.75.

The Appellant says that HMRC’s ‘correct’ figure is £93,322.68 and that the Appellant’s use of the HMRC calculator produces a figure of £105,461.03, taking no account of any offset.

HMRC’s calculations of the Support payments were detailed and included in the Document Bundle. The starting point was the salary figures agreed between the parties at the ADR. These were then multiplied by 80% and then converted into a daily rate by being divided by 7. This 80% daily rate figure was then multiplied by the number of days in the relevant claim to produce an expected Support payment. A similar calculation was used in relation to National Insurance Contributions and Pension contributions. The combination of these produced the amounts shown in the table.

As the salary figures were agreed, there was no dispute in relation to these.

On 13 October 2020, the Respondents issued a letter to advise that they were opening a compliance check. The Respondents’ letter set out the information required in order to check the Support payments claimed under the 5 claims. The Respondents gave the Appellant until 27 October 2020 to respond.

Between 17 December 2020 and 30 September 2022, the Appellant supplied records and explanations including employee payslips.

On 12 October 2022, the Respondents issued a pre-assessment letter advising the Appellant of their findings and this was followed by a formal Assessment on 26 October 2022.

On 7 November 2022, the Appellant appealed against the Assessment and on 18 December 2022, the Appellant stated, via email, that they considered that any amount overpaid via a claim should be recovered from the employees through tax codes.

On 10 January 2023, the Respondents provided their view of the matter and offered the Appellant an independent review.

On 8 February 2023, the Appellant requested an independent review and on 24 March 2023, the Respondents issued a review conclusion letter in which the independent reviewer upheld the pre ADR assessment.

On 6 September 2023, the Appellant made an appeal to the tribunal.

Following an application, the Appeal entered into Alternative Dispute Resolution (ADR) which did not resolve the dispute.

Further actions were agreed following the ADR meeting on 16 April 2024.

‘What happens in ADR, stays in ADR’ and there were no minutes of the meeting.

At the ADR, the Appellant had provided additional information. As a result of this, the Respondents updated their original view to confirm that 20 employees should be classed as ‘fixed rate’ employees under the Direction, as defined in Paragraph 7.6. In the light of this, the Respondents recalculated the amount of support payments due, based on the revised ‘reference salary’ figures.

Accordingly, we had an agreed Statement of Facts which we accepted and which established the following: –

On 4 October 2024, HMRC issued revised calculations of overpaid Support payments to the Appellant.

The Appellant does not agree that HMRC have calculated the reference salary for these employees correctly.

SC confirmed that he had worked for HMRC for the last 14 years and had received training in relation to the CJRS from mid-March 2020 onwards.

SC set out how he would carry out a compliance check, which had been largely confirmed to the Appellant in his letter of 21 November 2022 albeit in relation to the pre-ADR assessment, and which included checking whether employees were eligible for the CJRS and then ascertaining the basis on which the relevant employees were paid.

A table contained in the document bundle showed that CB had both monthly and weekly paid employees and the calculation of their 100% entitlement, the 80% entitlement and a calculated ‘daily rate’ at 80%.

An employee, KB, was chosen as an example who was paid on a weekly basis in an amount of £346.15 at 100% and 276.92 at 80%. The calculation of the daily, rather than the weekly, rate at 80% totalled £39.45.

This was calculated as follows:

We were taken to a pay slip for KB which showed “Furlough Pay” of £276.92 being the weekly amount due for the period 5 February 2021 and to his letter dated 14 May 2024 which confirmed that he had received Furlough payments ‘as I expected’ during periods in 2020 and 2021.

SC was asked why he needed to calculate a ‘daily rate’ and the statutory basis for doing so, as counsel for the Appellant stated that the Direction does not mention a daily rate. SC was unable to explain where in the Direction it stated a daily rate was required to be calculated. He said this was included in the 3^rd Direction but was not explicitly mentioned in the Direction or 2^nd Direction.

SC said that the reason for calculating a daily rate was to provide a figure which took into account that monthly and weekly payments to employees can change over a claim period which is calculated a per the relevant number of days.

SC was asked why, in calculating a daily rate from a weekly payment amount he had used the denominator of 7 rather than 5, as counsel for the Appellant stated that the employees worked a 5 rather than a 7 day week. SC replied that he had not been advised of a 5 day week until the date of the hearing and that 7 was the basis on which these calculations were made.

SC stated that his calculations were made entirely on the basis of the salary data agreed with the Appellant and using a methodology set out both in his training for CJRS and as determined by his managers.

We did not have a record of the information which was input into the HMRC calculator by the Appellant, on which to make any comparison with the figures utilised by HMRC. The Appellant had no record of this. The only records relating to this were the payslips which had been issued to the employees, bank statements evidencing payments and letters from the employees confirming receipt of Support payments.

The circumstances surrounding inputting of information and calculation for the 5 claims was that Mr McGee was hospitalised and required to be on a ventilator as a result of coronavirus. Members of his family had assisted in providing the information to HMRC who were less familiar with the process which in any event was new to both the Appellant and HMRC.

SC stated that the calculations of an employee’s ‘reference salary or wages’, as referred to in paragraph 8.2 (b) of the Direction, were made in accordance with paragraph 7.7 of the Direction and were applicable in relation to the post ADR assessment as all employees had been ascertained as ‘fixed rate employees’.

The amounts allegedly overclaimed total £12,073.51. Claims A01C and A22D referred to in the Table are the amounts ‘not claimed’ or ‘underclaimed’ and amount to £8,589.75. Previously, the Respondents had offset underclaim amounts against amounts due for a separate period in relation to the pre ADR assessment which the Respondents now say is incorrect. This ‘incorrect’ offset was, however, upheld on review.

Counsel for HMRC say HMRC is unable to offset the liability of the Appellant to the Respondents, against any underclaims made in the CJRS claims between 23 March 2020 and 31 March 2021 because of the 5^th Direction, and in particular paragraph 33.1, which provides that claims must not be made after the CJRS deadline day relating to the CJRS extension calendar month in which the CJRS claim period of the claim occurs.

Paragraph 33.4 provides that a request to amend a CJRS claim to increase the amount claimed at the time when the claim was made may be accepted by HMRC provided the amendment is not made after the CJRS claim amendment deadline day relating to the CJRS extension calendar month in which the CJRS claim period of the claim occurs.

HMRC may accept under paragraph 33.3 a CJRS claim made after the relevant CJRS deadline day if- (a) there is a reasonable excuse for the failure to make the claim in time, and (b) the claim is made within such further time as HMRC may allow.

There was no evidence of a reasonable excuse having been made nor of any claim made prior to 31 March 2021.

The tribunal is asked to decide

The burden lies with the Respondents to demonstrate that the Assessment requires to be increased as there was an error in the calculation and should be amended to reflect the revised amounts following ADR.

The burden is also with the Respondent to show that the Assessment was made in accordance with the legislation.

The burden lies with the Appellant to demonstrate that they have been overcharged by the Assessments.

The standard of proof is the ordinary standard, which is the balance of probabilities.

Coronavirus Act 2020 (“Coronavirus Act”).

Finance Act 2020 (“FA 2020”) Schedule 16 FA 2020 (Paragraphs 8 & 9) – power to raise assessments for amounts of CJRS a person has claimed to which they are not entitled.

Taxes Management Act 1970 (“TMA 1970”) Section 34 Time limits for raising assessments.

Taxes Management Act 1970 Section 50 – power for the Tribunal to decrease or increase assessments.

The Coronavirus Act 2020 Function of Her Majesty’s Revenue & Customs (Coronavirus Job Retention Scheme) Direction – dated 15 April 2020 (“the Direction”), as modified on 20 May 2020 (“Second Coronavirus Direction”), 25 June 2020 (“Third Coronavirus Direction”), 1 October 2020 (“Fourth Coronavirus Direction”), 12 November 2020 (“Fifth Coronavirus Direction”), 25 January 2021 (“Sixth Coronavirus Direction”) and 15 April 2021 (“Seventh Coronavirus Direction”).

Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682) (“the PAYE Regs”).

Schedule 41 of Finance Act 2008 (“FA 2008”)

In Mr McKee’s absence in hospital, his family input the data for CB on the understanding that the amounts to be claimed were 80% of the salaries paid from 19 March 2020.

The Appellant says it has struggled to follow the basis of HMRC’s calculations of the reference salary for employees and say that the tax Assessment is wrong in law as the method of calculation of the average daily rate is not referred to in the Coronavirus Act nor in the Coronavirus Directions.

Accordingly, the calculations produced by HMRC in relation to the post ADR assessment do not produce the required 80% of the employees’ wages.

The Appellant used the HMRC calculator to calculate the sums due to employees and paid the sums over to the employees which it says represented 80% of the employees’ wages in the sum of £105,461.03 in relation to the 5 claims for the period commencing 23 March 2020 to 31 March 2021. The total payroll cost was £116,714. 99.

The Appellant refers to paragraph 2.2 of the Direction which states “integral to the purpose of CJRS is that the amounts paid to an employer pursuant to a claim under CJRS are only made by way of reimbursement of the expenditure described in paragraph 8.1 incurred or to be incurred by the employer in respect of the employee to which the claim relates to.”

Paragraph 8.1 of the Direction states:

“Subject as follows, on a claim by an employer for a payment under CJRS, the payment may reimburse- (a) the gross amount of earnings paid or reasonably expected to be paid by the employer to an employee; (b) any employer national insurance contributions liable to be paid by the employer arising from the payment of the gross amount; (c) the amount allowable as a CJRS claimable pension contribution.”

Paragraph 8.2 of the Direction states;

“The amount to be paid to reimburse the gross amount of earnings must (subject to paragraph 8.6) not exceed the lower of- (a) £2,500 per month, and (b) the amount equal to 80% of the employee’s reference salary (see paragraphs 7.1 to 7.19).”

Paragraph 7 of the Direction states:-

“7.1

Costs of employment meet the conditions in this paragraph if- (a) they relate to the payment of earnings to an employee during a period in which the employee is furloughed, and (b) the employee is being paid- (i) £2500 or more per month (or, if the employee is paid daily or on some other periodic basis, the appropriate pro-rata), or (ii) where the employee is being paid less than the amounts set out in paragraph 7.1(b)(i), the employee is being paid an amount equal to at least 80% of the employee’s reference salary.

7.2

Except in relation to a fixed rate employee, the reference salary of an employee or a person treated as an employee for the purposes 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 2019-20 (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.

7.3

The following must not be included in the calculation of an employee’s reference salary for the purposes of paragraphs 7.2 and 7.7- (a) benefits in kind; (b) anything provided or made available in lieu of a cash payment otherwise payable to the employee (including salary sacrifice schemes); (c) anything which is not regular salary or wages.

7.4

In paragraph 7.3(c) “regular” in relation to salary or wages means so much of the amount of the salary or wages as- (a) cannot vary according to a relevant matter except where the variation in the amount arises from a non-discretionary payment (see paragraph 7.19), and (b) arises from a legally enforceable agreement, understanding, scheme, transaction or series of transactions.

7.5

For the purposes of paragraph 7.4(a), the following are relevant matters- (a) the performance of or any part of any business of the employer or any business of a person connected with the employer; (b) the contribution made by the employee to the performance of, or any part of any business; (c) the performance by the employee of any duties of the employment; (d) any similar considerations or otherwise payable at the discretion of the employer or any other person (such as a gratuity).

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.

7.7

The reference salary of 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).”

The Appellant says that the amount which HMRC say is the correct 80% calculation is £93,322.68 and takes no account of the underclaimed amounts of £8,589.75.

HMRC’s equivalent figure is £92,461.46 (£104,534.97 less £12,073.51 (comprised of what HMRC say are overpayments of £7,596.64 + £,4323.71 + £153.16) and takes no account of the underclaimed amounts of £8,589.75,which they say cannot be offset.

The Appellant says that HMRC have not discharged the burden of proof to establish that the post-ADR assessment is in accordance with the legislation.

The Appellant disputes HMRC’s assertion that offsetting underpayment in one period against an overpayment in another period is not allowed as the Directions issued by the Treasury on CJRS make no mention of a restriction on offsetting an underpayment against an overpayment in CJRS calculations.

In deciding whether the assessments are correct overall, the Appellant’s position is that the underpayment should be included to ascertain the total liability of the Appellant (if any).

The Appellant invites the tribunal to exercise their powers under section 50(6) TMA 1970 to reduce the post-ADR assessment and allow the appeal as HMRC’s calculations do not comply with the legislation.

In the alternative, the Appellant invites the tribunal to amend the assessments to allow for underpayments to be offset against overpayments (if any) in exercise of their powers under section 50(6) TMA 1970.

The Appellant says that it has a legitimate expectation to the extent that HMRC allowed the offset between overclaimed and underclaimed amounts in relation to the pre ADR assessment, which was then confirmed by a review officer but then HMRC changed their mind.

The Appellant relies on Ian Feltham v Revenue & Customs [2011] UKFTT 612 (TC) as authority for their submission that the First-tier Tribunal must deal with cases ‘fairly and justly’ as set out at Rule 2 of The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (“The Rules”) and to [84] of that decision which states:

Ian Feltham concerned the place of supply for the purposes of VAT legislation.

No prior notice of this case nor of Jama Academy Limited v HMRC [2024] TC 09131 was given to the Respondents or the tribunal.

The Appellant also relies on Jama Academy Limited, which primarily held that employees in respect of whom CJRS claims had been made were incorrectly calculated, at [16] and [21]:

The Respondents refer to Paragraph 8(4) Schedule 16 FA 2020 which sets out that income tax becomes chargeable in respect of overclaimed CJRS payments at the time the CJRS payment is received, not when the CJRS claim was made:

“8(4) Income becomes chargeable under this paragraph-

(a)

in a case where the person was entitled to an amount of coronavirus support payment paid under the coronavirus job retention scheme or the self-employment income support 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.”

Paragraph 9(2) of Schedule 16 states:

“An assessment under sub-paragraph (1) may be made at any time, but this is subject to sections 34 and 36 of TMA 1970.”

The Appellant made a total of five claims.

The Respondents raised an Assessment on 28 October 2022 in accordance with the provisions of Paragraph 9, Schedule 16 FA 2020 within the normal time limit of ‘not more than 4 years after the end of the year of assessment to which it relates’ as per Section 34 TMA 1970.

The Respondents refer to Cafe Jinnah LLP v HMRC [2024] UKFTT 159(TC) where it was made clear that for an assessment to be valid, the officer must demonstrate that they had both a subjective and objective opinion that the appellant was not entitled to the support payment in the amount claimed at [20].

The Café Jinah Tribunal also found at [25] that for HMRC to establish that they have made a valid assessment, it needed to find that:

“(1)

the officer believed that the information available to him pointed in the direction that the appellant had received a support payment to which it was not
entitled; and

(2)

The belief is an objectively reasonable one i.e.. One which a reasonable officer
could form on the basis of the information available to him.”

The Respondents say that this test was confirmed in Jerome Anderson v HMRC [2018] UKUT 0159 (TC), where the Upper Tribunal set out two tests which must be met for the condition of section 29(1) TMA 1970 (discovery assessments) to be satisfied: a subjective test and an objective test.

The test was set out at [28]:

The Respondents submit that the Appellant has received an amount of Support payments to which they are not entitled which was discovered when reviewing the information supplied as part of a check.

The Respondents, therefore, contend that the Assessments are in accordance with legislation at Schedule 16 FA 2020 and Section 34 TMA 1970 and are valid.

The Respondents submit that the actions taken to prepare the assessments are correct.

The Respondents have taken the number of calendar days in total to calculate whether the claimed amounts were correct. This is in line with the guidance as shown at Calculate how much you can claim using the Coronavirus Job Retention Scheme - Gov.UK which states:

“Work out 80% of wages for employees on a fixed salary To work out 80% of your employee’s wage:

Start with the wages payable to your employee in the last pay period ending on or before the employee’s reference date – if you’re claiming for a full pay period, skip to step 4.

Divide by the total number of days in the pay period you’re calculating for.

Multiply by the number of furlough days in the pay period (or partial pay period) you’re claiming for.

Multiply by 80%.’

In the event that the claims were amended, the number of claimable days would reduce in line with the expected number of working days.”

Claim A21A shown in the Table runs from 23 March 2020 to 04 May 2020 which is 43 calendar days. The Respondents have calculated a daily rate as though the employees were available every day of the week i.e. 43/43 days or 100%. Should the Respondents adjust this to the employee having 30 working days within that claim period, then the calculation 30/30 days or 100%. Consequently, the calculated amounts would not therefore be affected.

The Respondents confirm that following information supplied at ADR, they consider that the employees were fixed rate employees. Based on that, the Respondents recalculated what the entitlement should have been. The recalculations by the Respondents increased the amount overpaid to the Appellant and the assessment required adjustment.

The Respondents say that at no point during the enquiry, the appeal, ADR or the hearing has the Appellant been able to provide calculations to demonstrate how they arrived at the amount of each claim and submit that despite the further information from the Appellant, this still does not explain why the Appellant claimed more than they should have.

The Respondents have asked the Appellant to show how they have calculated their claims but the Appellant has not been able to provide evidence where their figures came from.

The Respondents submit, that in the absence of evidence from the Appellant, the Respondents rely on the amounts of salaries agreed with the Appellant to arrive at the reference pay amounts for each employee to determine what should have been paid to the Appellant in the five claims.

The Respondents submit that these three claims have been reviewed following agreement that the employees should be classed as fixed pay employees for all periods. The amounts overclaimed total £12,073.51.

The Respondents submit that although these two revised calculations show that the Appellant had underclaimed for these two periods. In the previous calculations, in relation to the pre ADR assessment, the unclaimed support payments were offset against the total amounts overclaimed which the Respondents say was made in error.

The Respondents aver that this offset was not in line with the Legislation as set out at Paragraph 33 of the Fifth Coronavirus Direction which states;

The Respondents submit that this was discussed in Lucky Eyes Ltd [2024] UKTDD 868(TC) where the Judge stated

“…The FTT found that there was no provision in the legislation (FA 2020, Sch 16, para 8) which would allow an underclaim from one period to be offset against an overclaim from a different period – any offset could only be done within the same claim period.”

The Respondents aver that the Appellant has provided no reasonable excuse why the Appellant did not make a late claim for the unclaimed amounts or made an amendment within the CJRS claim amendment deadline days.

Claims for under claimed amounts were not, in terms of paragraph 33 of the Fifth Coronavirus Direction made in time, as no claim was made by 31 March 2021.

The Respondents are unable to off-set the Appellants underclaims for the period 01 January 2021 to 31 January 2021 and 1 March 2021 to 31 March 2021 against the three over claim periods listed in the Table. They should not have been included in the pre ADR assessment and are not included in the post ADR assessment.

The Respondents contend that whereas offsetting can be used where an employer has overclaimed for one employee and underclaimed for another employee within the same claim period, this off-setting cannot result in an amount being due to the employer.

The Respondents aver that whilst an underclaim may be considered for new disclosures or whilst calculating assessments, an employer cannot retrospectively change a previous disclosure to include an amount underclaimed in error.

HMRC refer to their Guidance during the claim periods which stated:

“If you make an error when claiming

If you have made an error in a claim that has resulted in an overclaimed amount, you must pay this back to HMRC.

If you are making another claim then you can tell us about an overclaimed amount as part of this. When you make your next claim you will be asked whether you need to reduce the amount to take account of a previous overclaim. Your new claim amount will be reduced to reflect the overclaimed amount and you should keep a record of this adjustment for 6 years.

If you have overclaimed and you do not plan to submit any further claims then you should contact HMRC to let us know about your error and find out how to pay back any overclaimed amounts. Once you have contacted us you will be given a payment reference number and directed to make a payment.

If you have made an error that has resulted in an underclaimed amount, you should contact HMRC to amend your claim. As you are increasing the amount of your claim, we need to conduct additional checks.”

The Respondents submit that the Guidance allows an employer who has previously overclaimed to reduce a later claim amount in order to reflect that overclaim.

The Respondents contend that the Guidance clearly states that the employer would be required to advise the Respondents about any overclaim prior to reducing the later claim to reflect this. The Respondents contend that there is no evidence within the Appellant’s records to demonstrate that this process had been followed.

The Respondents submit that with Feltham, the tribunal and Respondents were open to discuss the Appellant’s contentions in full at the hearing. The main argument in relation to the Respondents’ calculations was discussed in depth and the Respondent’s witness replied in detail in relation to HMRC’s calculations. The Appellant was given every opportunity to present their submissions to the tribunal.

The Respondents have considered the comments made at paragraph [16] of Jama and contend that the original pre ADR calculation was agreed by both parties to be in error during Alternative Dispute Resolution, when agreement was reached to adjust the calculations on the basis that employees were fixed rate employees (rather than ‘variable-rate’) and the calculations required amendment to reflect this agreement.

With regards to paragraph [21] of Jama, the Appellant has agreed that the reference pay and the calculation of the “reference salary” at 80% of that amount is correct as part of the ‘Statement of Agreed facts’ provided by the Appellant’s agent on 18 August 2025.

HMRC say that the Appellant has failed to particularise their grounds for appeal fully nor has it discharged its burden of proof.

The Respondents invite the tribunal to exercise their powers under Section 50(7) TMA70 to vary and confirm the post ADR assessment to £12,073.51.

Following the ADR process the parties agreed that the pre-ADR assessment was in time and that all CB employees were fixed pay employees and so an amendment was required . It was also agreed that the relevant pay figures for 2019/2020 were correct. What was not agreed was how these amounts were used to calculate the Support payments.

Accordingly, the issues for the tribunal were whether the post ADR calculations were correct and made in accordance with the legislation and whether the overclaims and underclaims can be offset against each other. We are also required to consider the ‘public law’ contention of the Appellant’s legitimate expectation and how to exercise our powers, if at all, under Section 50 of the TMA 1970.

Given the extraordinary circumstances at the time, HMRC operated a ‘process now and check later’ policy and did so by taxpayers entering amounts into the HMRC calculator, which then calculated the amount of CJRS support that could be claimed. It was the taxpayer’s responsibility to ensure the claims made were correct.

HMRC say that their calculations of the reference pay were correct and set out how they calculated them.

The evidence provided by the Appellant only disclosed what the payslips and bank statements showed in relation to the Support Payments.

We had no evidence of what information had been input to the HMRC calculator by the Appellant and on which it based its contention that the calculation of the 5 claims were in line with the legislation. In view of this we had no option but to rely on the calculations provided with detailed workings by HMRC. There was no rebuttable evidence on this point.

We accepted that CB’s employees were all, eventually, correctly classified as “fixed rate” employees and most were paid weekly with a few monthly.

The CJRS was established to provide Support Payments to employers on claims made in respect of their incurring costs of employment in respect of furloughed employees arising from the health, social and economic emergency in the United Kingdom resulting from coronavirus.

The scheme allowed a qualifying employer to apply for reimbursement of 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 Direction to govern HMRC’s administration of the CJRS on 15 April 2020 (subsequently followed by several Directions that set out modifications to the Direction in relation to CJRS during the pandemic).  

Under Paragraph 3 of the Direction, an employer could make a claim for Support Payments under CJRS if it had a PAYE scheme registered on the Respondents RTI system for PAYE by 19 March 2020.  

Paragraph 5 of the Direction detailed the Qualifying Costs an employer was entitled to claim for under the CJRS and referred to Schedule A1 to the PAYE Regulations. Regulation 67B of the PAYE Regulations states that “on or before making a relevant payment to an employee, a RTI employer must deliver to HMRC the information specified in Schedule A1 in accordance with this regulation”. 

Schedule A1 detailed the information regarding payments to employees which must be given to HMRC, including the dates of the payment and employees’ pay frequency. 

Paragraphs 7.8 to 7.15 although relating to aspects of the definition of a ‘fixed rate employee’ are not relevant for the matter under appeal.

There were a further six directions which modified the effect of the Coronavirus Direction.

Paragraph 8(1) of Schedule 16 to FA 2020 made a recipient of an amount of a Support Payment liable to income tax if the recipient was not entitled to the amount.

Paragraph 8(4) detailed when income tax became chargeable.

Paragraph 8(5) detailed the amount of income tax chargeable as being equal to the amount of Support Payment to which a claimant was not entitled and had not repaid.

Paragraph 9 afforded HMRC the power to make assessments to income tax as chargeable under paragraph 8 and allowed an Officer to make an assessment where she/he considered that a person had received an amount of Support Payment to which he/she/it was not entitled in an amount which ought, in the Officer’s opinion, to be charged under paragraph 8.

An assessment could be made at any time under Paragraph 9(2) FA 2020 but subject to the statutory assessing time limits pursuant to sections 34 and 36 of the TMA 1970.

When a person liable to income tax charged under paragraph 8 of schedule 16 to FA 2020 is a Company that is chargeable to corporation tax, then paragraph 11 also applied.

Paragraph 11 set out how the income tax charge operated in relation to a Company’s calculation of their corporation tax liability.

Accordingly, the Direction is short on detail in relation to the calculation of a fixed rate employee’s reference salary and Support payments. This may have been because this was considered to be more straightforward than the alternative, for a variable rate employee, where there were different methods of calculating the reference salary.

We have, therefore, to look at the terms of the Direction in relation to whether the method of calculation, which is disputed between the parties, met the criteria so as to qualify as a valid assessment.

We consider this in two stages. The first relates to the methodology used by HMRC to calculate the amounts of Support payments and the second is whether an Officer of HMRC has demonstrated both a subjective and objective opinion that the Appellant was not entitled to the Support payments claimed.

HMRC’s evidence was that they were required to make Support payments based on a reference salary or wages which were not always consistent due to adjustments that may be made to even fixed rate employees such as absence through changed hours of work, non-paid absence, sickness, maternity leave or other similar factors.

Claims were calculated using the number of eligible days per claim.

Weekly or monthly salary amounts need not necessarily equate to the number of days in a claim period. The claim from 11 May 2020 to 21 June, for instance, covers a period of 41 days or 5 weeks and 6 days, not 6 weeks.

A mathematical device, therefore, was employed to arrive at an appropriate daily amount on which, subject to the limits in the Direction, would be paid at the rate of 80%.

We consider that establishing a daily rate is an equitable and mathematically sound basis on which to calculate such claims.

In order to calculate the daily rate, SC stated in evidence that to arrive at an average daily rate for a weekly paid fixed rate employee, he chose a denominator of 7 days representing a week. The Appellant stated that this was incorrect as the employees worked 5 days a week and that 7 days was not specified in the Direction.

Paragraph 7 of the Direction refers, in relation to fixed rate employee’s reference salaries, to annual salaries. In the absence of any other provisions defining these terms, we look at the ordinary meaning of the words “annual” and salary”. The Oxford Concise Dictionary defines salary as “a fixed regular payment, usually monthly or quarterly made by an employer to an employee”.

It defines “annual” in this context as “occurring every year” and defines “year” as “the time occupied by the earth and one revolution around the sun, 365 days, 5 hours 48 minutes and 46 seconds in length” or “the period of 365 days (common year) or 366 days (see leap year) from 1 January to 31^st December used for reckoning time in ordinary affairs”

We consider therefore, that HMRC’s use of 7 days in a week in order to establish a daily rate is appropriate and that the use of a five-day week, meaning a 260 day year is inappropriate as it does not meet the ordinary and usual definitions of annual salary which are the words used in the Direction.

HMRC initially raised the pre-ADR assessment on 28 October 2022 under the provisions of paragraph 9 of schedule 16 FA 2020.

In order for this and any subsequent assessment to be valid and we refer to analysis, with which we agree, in Cafe Jinnah LLP v HMRC [2024] UKFTT 159 (TC) where the Tribunal (Judge Nigel Popplewell and Mohammed Farooq) stated at [14],[18]and [20]-[25] (this numbering starts after [66] and continues to [65]):

“[14] HMRC bears the burden of proving on the balance of probabilities that the assessment….. properly assesses the appellant to income tax as the appellant did not satisfy the conditions of the scheme.

[18] HMRC’s right and power to issue an assessment where it thinks that a taxpayer has received a coronavirus support payment to which it was not entitled, is under paragraph 9(1) schedule 16 FA 2020. This reads: ‘(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’.

[20]…………… it is our view, as well as that of the parties, that for an assessment to be valid, the officer must demonstrate that he had both a subjective and an objective opinion that the appellant was not entitled to the support payment in the amount claimed.

[21] It is our view that the assessing powers given to an officer are akin to those in section 29 TMA. This view is supported by the fact that paragraph 9 goes on to import, into the appeal process, parts 4-6 TMA which are consistent with a discovery assessment under section 29 TMA.

[22] The correct approach is therefore set out in the case of Jerome Anderson v HMRC [2018] UKUT 159 (“Anderson”).

“The subjective test

[25]. It is clear that before an officer makes a discovery assessment, he must have formed a certain state of mind. The question raised on this appeal is: what must the officer think or believe? The three judges in the Divisional Court in R v Kensington Income Tax Commissioners all agreed that it was not necessary for the officer to reach a conclusion which was justified by sufficient legal evidence. However, when describing what was required for this purpose, the three judges expressed themselves in different terms which do not appear to us to describe the same test.

[26]. Any test which is devised as to the necessary subjective belief on the part of the officer must be a practical and workable test. The expression of the test has to recognise that at the time when an officer thinks that it is desirable to make a discovery assessment, the officer may appreciate that in certain respects he may not be in possession of all of the relevant facts. Further, the officer may foresee that a discovery assessment might give rise to questions of law some of which might not be straightforward.

[27]. In Revenue and Customs Commissioners v Lansdowne Partners Ltd Partnership, when considering the meaning of “be aware of” for the purposes of s 29(5), it was said that “awareness” was a matter of perception not conclusion and that it was possible to say that an officer was “aware of” something even when he could not at that stage resolve points of law and even though he was not then aware of all of the facts which might turn out to be relevant. Although the word “discover” and the phrase “be aware of” cannot be treated as synonyms, we consider that if it is possible to be aware of something when one does not know all of the relevant facts and one cannot foretell how relevant points of law will be resolved, it cannot be said to be premature for an officer to “discover” that same something even when he knows he is not in possession of all of the relevant facts and does not know how relevant points of law will be resolved.

[28]. In Sanderson, Patten LJ described the power under section 29(1) in this way:

“The exercise of the section 29(1) power is made by a real officer who is required to come to a conclusion about a possible insufficiency based on all the available information at the time when the discovery assessment is made.”

We consider, with respect, that this test is in accordance with the earlier authorities. This passage describes the test somewhat briefly because, of course, that case 8 47 concerned s 29(5) rather than s 29(1). Having reviewed the authorities, we consider that it is helpful to elaborate the test as to the required subjective element for a discovery assessment as follows:

“The officer must believe that the information available to him points in the direction of there being an insufficiency of tax.”

That formulation, in our judgment, acknowledges both that the discovery must be something more than suspicion of an insufficiency of tax and that it need not go so far as a conclusion that an insufficiency of tax is more probable than not.”

The objective test

[29] The authorities establish that there is also an objective test which must be satisfied before a discovery assessment can be made. In R v Bloomsbury Income Tax Commissioners, the judges described the objective controls on the power to make a discovery assessment. Those controls were expressed by reference to the principles of public law. In Charlton at [35], the Upper Tribunal referred to the need for the officer to act “honestly and reasonably”.

[30] The officer’s decision to make a discovery assessment is an administrative decision. We consider that the objective controls on the decision making of the officer should be expressed by reference to public law concepts. Accordingly, as regards the requirement for the action to be “reasonable”, this should be expressed as a requirement that the officer’s belief is one which a reasonable officer could form. It is not for a tribunal hearing an appeal in relation to a discovery assessment to form its own belief on the information available to the officer and then to conclude, if it forms a different belief, that the officer’s belief was not reasonable”.

[23] And at [43] it applied this objective test in the following way:

“The FTT asked itself whether Ms Lampard’s belief that there had been an insufficiency of tax was a reasonable belief. It appears that the FTT applied a wholly objective test as to whether her belief was reasonable. We were taken to the evidence before the FTT and, at the very least, we conclude that it was open to the FTT to make that finding on that evidence. However, it seems to us that the FTT applied a stricter test than was necessary. If we apply what we consider to be the correct test, namely, whether Ms Lampard’s belief was one which a reasonable person could form on the information available to her, then we would conclude that a reasonable person, acting on that information, could form the belief which she had formed. Indeed, it is obvious that the FTT would also have held that this lower test was satisfied” (emphasis added).

[24] This approach was endorsed by the Supreme Court in HMRC v Tooth [2021 UKSC 17 said a [72]:

“the exercise of the s29 (1)) power is made by a real officer who is required to come to a conclusion about a possible insufficiency based on the available information at the time when the discovery assessment is made”. From this and other authorities the [UT in Anderson] derived a series of propositions… including that in s29(1) the concept of an actual officer discovering something involves an actual officer having a particular state of mind in relation to the relevant matter, which requires the application of a subjective test (explained further at paras 25-28). There is also an objective test, in that mere suspicion of an under-assessment of tax is not sufficient and the belief which the 9 48 officer forms regarding the under-assessment has to be one which a reasonable officer could form (paras 24 and 29-30)...” .

Accordingly, for HMRC to establish that they have made a valid assessment, we need to find the following: (1) that SC believed that the information available to him pointed in the direction that the Appellant had received Support payments to which it was not entitled; and (2) that belief is an objectively reasonable one i.e. one which a reasonable officer could form on the basis of the information available to him.

The Appellant had not retained the records of the information it input to the HMRC calculator. We must, therefore, rely on the salaries agreed by the parties and consider whether, both subjectively and objectively, SC believed that CB had received support payments to which it was not entitled and which a reasonable officer could form on the basis of the information available to him.

Taking all these factors into account, we consider that SC had a genuinely held and subjectively reasonable opinion that the claim for Support payments by the Appellant overstated the amount actually received. The methodology used in calculating the over claimed amount was a reasonable one. He objectively reached a reasonable decision based on the evidence which was made available to him.

The relevant evidence such as it was, provided by the Appellant is insufficient to displace the assessment as adjusted by SC following the ADR process.

Accordingly, we hold that the post ADR assessment was correct and made in accordance with the legislation.

We prefer, and agree with, the Respondents’ submissions in relation to the issue of whether the two identified underclaimed amounts can be set off against the overclaimed amounts and the legislative basis on which this opinion was formed.

The Appellant has not identified any appropriate legislation which would allow it to offset the amounts as they suggest. The Appellant says that the Direction does not say that the HMRC cannot offset payments but, equally, the Direction does not say that HMRC can. Instead the Appellant relies on the fact that HMRC previously allowed an offset and clearly considers that this ‘change of mind’ is unfair and that it had a legitimate expectation to entitle it to such an offset.

HMRC referred to the Fifth Coronavirus Direction and to the provisions in paragraph 33.1 to 33.5 and to the decision by the Tribunal in Lucky Eyes Ltd v HMRC [2024] UK FTT 868 (TC) at [44] and [45] with which we agree:

“[44] The final issue that we need to consider is the set-off of amounts underclaimed in July and August 2020. HMRC say, by reference to HMRC guidance, that ‘when an employer has made an underclaim, they are able to offset any underclaims for employees against the overclaims for any other employees to arrive at the final, or “net” amount due to HMRC. However, this cannot result in an amount being due and it can only be done within the same claim period, not between different claim periods’.

[45] In their written submissions, HMRC made reference not only to The Coronavirus Act 2020, Functions of Her Majesty’s Revenue and Customs (Coronavirus Job Retention Scheme) Direction as issued on 15 April 2020, but also to the later directions made the Coronavirus Act 2020. HMRC noted that in the earlier directions made under The Coronavirus Act 2020, there was no provision to amend claims that had been made under the CJRS. In later directions, provisions were added that allowed for amendment within set time periods where there was a ‘reasonable excuse’. It is not clear to us that these submissions entirely address the point. That having been said, we note that the CJRS claims have clearly been made on a monthly basis and that paragraph 8 Schedule 16 FA 2020 imposes charges on amounts overpaid under the CJRS as and when they are received without any provision for set off. On that basis – and in the absence of any arguments to the contrary – we have accepted HMRC’s submission, although we have to say that the final result strikes us as prone to create unfairness.”

On the evidence before us we find that the claims were not made within the permitted time limits set out in the 5^th Direction and that the Appellant has provided no reasonable excuse why it did not make a late claim for the unclaimed amounts or made an amendment within the CJRS claim amendment deadline days.

Accordingly, we hold that the Appellants have failed to demonstrate that they have been overcharged by the Assessments.

The Appellant considers that the decision by HMRC to initially allow an offset of the amounts under claimed against the amount which HMRC say are over claimed but then to change its mind is unfair. The Appellant says it has a legitimate expectation to rely on the earlier decision of HMRC by both the Officer and then upheld in the independent review.

As noted by the Tribunal in Lucky Eyes the provisions relating to the strictures around amending claims by offset, and initially no provision at all, to amend claims is “prone to create unfairness”.

Whether something is fair is, of course, subjective and tax legislation is replete with provisions, such as time limits, which may be considered to be unfair. It is, however, for Parliament to make laws.

As was stated at the hearing, the Upper Tribunal in Hok Ltd v HMRC [2012] UKUT 363 (TCC) at [36] referred to the creation of the First-tier Tribunal by Section 3 (1) of the Tribunal, Courts and Enforcement Act 2017, “for the purpose of exercising the functions conferred on it under or by virtue of this Act or any other Act. It follows that its jurisdiction is derived wholly from statute”

At [39] the Upper Tribunal in Hok Ltd stated:

“Ordinarily challenges to administrative actions of government departments for which no clear avenue of appeal is provided must be made by way of judicial review: so much was made quite clear by the Court of Appeal in Asplin v Estill [1987] STC 723, in which the taxpayer argued that he should not be assessed to tax ( which he accepted was due as a matter of law) because of advice he maintained he had been given by the Inland Revenue.”

The decision continues at [41]:

“There is in our judgment no room for doubt that the First-tier Tribunal does not have any judicial review jurisdiction. That was made abundantly clear by the House of Lords in Customs and Excise Commissioners v J H Corbitt 20 (Numismatists) Ltd [1981] AC 22. That case related to the Value Added Tax Tribunals rather than the First-tier Tribunal, but they too were a creature of statute with no inherent jurisdiction, and the relevant principles are identical. Lord Lane (with whom the majority agreed) said, in what remains the classic statement on the point:

“Assume for the moment that the tribunal has the power to review the commissioners’ discretion. It could only properly do so if it were shown the commissioners had acted in a way which no reasonable panel of commissioners could have acted; if they had taken into account some irrelevant matter or had disregarded something to which they should have given weight. If it had been intended to give a supervisory jurisdiction of that nature to the tribunal one would have expected clear words to that effect in the [Finance Act 1972]. But there are no such words to be found. Section 40(1) sets out nine specific headings under which an appeal may be brought and seems by inference to negative the existence of any general supervisory jurisdiction.”

We consider that we were bound by the decision in Hok and that the tribunal’s role is to adjudicate on the law and has no jurisdiction other than that attributed to it by the statute which created it.

We do not consider that the Appellant’s claim of legitimate expectation is within the jurisdiction of the tribunal and on the evidence before us do not consider that HMRC’s conduct was “conspicuously unfair” or “so outrageously unfair” that it should not be allowed to stand.

Parliament have approved a law to allow HMRC to satisfy the tribunal in terms of Section 50(7) TMA 1970 so as increase an assessment.

In consideration of the parties’ submissions in relation to Ian Feltham we consider that the tribunal has throughout conformed to the provisions of Rule 2 of The Rules.

To the extent that the Appellant considers that the requirement for the tribunal to deal with cases ‘justly and fairly’ is in relation to its claim for legitimate expectation, we say that this is misplaced. We consider that the issue of legitimate expectation is not something within the jurisdiction of the tribunal.

In consideration of the parties’ submissions on Jama Academy, we agree, with the Respondents that the pre-ADR calculation was agreed by both parties to be in error. The correct fixed rate pay amounts were agreed and HMRC calculated the Support payments which differed from the calculations provided by the Appellant who have not provided calculations to demonstrate how they arrived at the amounts which they say are the correct Support payments.

As we consider that the SC’s calculation method was correct in terms of the legislation and that the post ADR assessment was valid both subjectively and objectively following the ADR process, this resulted in an increase in the amount that was calculated as overpaid.

We were not taken to any provisions in the legislation nor on the evidence that allows CB to offset the underclaimed amounts against the overclaimed amounts in the periods under appeal and in the circumstances of the appeal.

Accordingly, we use our power under Section 50(7) TMA 1970 to amend the assessment to the amount identified in the post ADR assessment representing an overclaimed amount of £12,073.51.

The Respondents made no submissions on the issues of legitimate expectation and fairness. Whereas we are mindful of the submissions made by the Appellant we do not consider we have any jurisdiction in which to consider these matters.

The appeal is dismissed.

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.