In Bandstream Media and Corporate Communications Limited v HMRC [2024] TC09016, the First Tier Tribunal (FTT) found that an employer could not base its Coronavirus Job Retention Scheme (CJRS) claims on a salary which was increased after 19 March 2020, and in lieu of dividends.
- Mr Smith, a director and shareholder of Bandstream Media and Corporate Communications Limited (Bandstream), was paid a salary of £600 per month throughout 2019, up to and including 31 March 2020.
- He was also paid monthly dividends of £2,500.
- Bandstream’s accountant recommended that Mr Smith replace his dividends with additional salary from 30 April 2020, for Bandstream to claim support payments under the Coronavirus Job Retention Scheme (CJRS) rate of 80% of the increased salary (£2,000 per month).
- This advice was based on a televised parliamentary debate watched by the accountant, in which the then Chancellor of the Exchequer suggested that directors paying themselves by Dividends and a small salary could take advantage of the CJRS.
- In the accountant’s view, the Chancellor had made an exception from the strict rules of the scheme for Directors who had paid themselves by dividend.
- The increased salary of £2,500 was paid monthly from 30 April 2020 and CJRS claims totalling £33,250 were subsequently submitted, covering the period 1 April 2020 to 30 September 2021.
- HMRC commenced a check into Bandstream’s CJRS claims and, in November 2021, gave their view that the claims should have been based on a salary of £600 per month.
- Notices of assessment were issued in February 2022.
- Following a Statutory review, Bandstream Appealed to the First Tier Tribunal (FTT).
The FTT found that:
- The CJRS legislation did not allow a claim for support payments to be based on the increased salary of £2,500.
- Bandstream’s claims should have been based on a salary of £600 per month.
- The legislation was not intended to allow an employer to inflate an employee’s wages after the introduction of the CJRS and thereby effectively have the taxpayer underwrite an employee’s salary.
- The legislation was designed to fix an employee’s salary to that recorded on the latest Real-Time Information submission before 19 March 2020.
- The televised debates watched by the accountant could not influence the FTT’s interpretation of the clear language of the statutory provisions.
- The FTT had to look at the actual words used by the legislation and could not consider parliamentary debates which preceded its enactment.
The appeal was dismissed.
Useful guides on this topic
Do I pay a salary or dividend? 2023/24
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Tax-efficient extraction of profits: toolkit (2023/24)
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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.
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External link
Bandstream Media and Corporate Communications Limited v HMRC [2024] TC09016
