In Carlick Contract Furniture Limited v HMRC [2022] TC08543, the First Tier Tribunal (FTT) ruled that Coronavirus Job Retention Scheme (CJRS) claims for two employees were not qualifying costs, whilst acknowledging that denying the claims seemed to be contrary to the spirit of the scheme.

  •  The appellant is a long-established manufacturer of furniture for the hospitality industry.
  • In February 2020, it took on two employees, both starting work on 24 February.
  • Due to the cut-off for the February payroll being 21 February 2020, neither was included on the run on 26 February 2020. Instead, they were paid both February and March's salary in arrears in the March payroll run on 25 March 2020.
  • The start of the pandemic saw the hospitality industry close overnight and the appellant was also forced to shut down for two months. All staff were furloughed except senior management.
  • The two employees were made redundant on 23 October, with the appellant making 70 of its 130 workforce redundant. Up until that point, their costs had been included in seven claims under CJRS.
  • HMRC made enquiries into the claims and found that the two employees were not included in any Real-Time Information (RTI) provided to HMRC before 19 March 2020 (the cut-off date for qualifying employment). HMRC concluded that the claims were invalid and raised an assessment to Income Tax of £20,504 in relation to the two employees.
  • An appeal was made to the FTT.

The CJRS rules were laid out in a series of Directions. The First Direction covered the initial claim that could be made for furloughed employees. A valid claim required 'qualifying costs':

  • In relation to an employee, for whom payment of earnings was made, on or before, the relevant day.
  • Where that employee had not ceased employment and had been furloughed.

The relevant day was initially 28 February 2020 and was subsequently changed to 19 March 2020, in order to help employees who had recently changed jobs.

HMRC referred to a Press Release published on 15 April 2020 which made it clear that not only must the employees be employed by 19 March 2020, but that they must have been notified to HMRC through an RTI submission by that date.

The FTT was sympathetic to the appellant's argument that their claim was within the spirit of the scheme but noted that they were bound by the legislation and had no scope to determine whether an outcome was fair or not. They found that as the employees had not been included within an RTI notification to HMRC before the relevant date, the claims were invalid and the assessment stood. The appeal was dismissed.

Useful guides on this topic

Covid-19: Coronavirus Job Retention Scheme (CJRS) to 31 October 2020
Coronavirus Job Retention Scheme (CJRS): a cash grant payable to employers up to 31 March 2021.

RTI: Real-Time Information for PAYE 
What is RTI: Real-Time Information (RTI) reporting for PAYE? How does it work?

External link

Carlick Contract Furniture Limited v HMRC [2022] TC08543

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