In HMRC v Marc Gunnarsson [2025] UKUT 247 (TCC), the Upper Tribunal (UT) found that Self-Employment Income Support Scheme (SEISS) claims by a director of a limited company were incorrect. He was required to repay the amounts claimed.
Mr Gunnarsson received a generic email from HMRC on 8 May 2020, which was sent to taxpayers who may have been eligible to claim Self-Employment Income Support Scheme (SEISS) payments, explaining how to make a claim. The email did not provide any assurance that Mr Gunnarsson was entitled to support under the scheme.
- Two SEISS claims following receipt of the email were made: the first on 18 May 2020 and the second on 8 September 2020.
- Mr Gunnarsson's tax returns showed the following income:
- 2018-19: Income from self-employment and dividends from UK companies. He stated that he ceased self-employment on 3 September 2018.
- 2019-20: Dividends from UK companies and employment income.
- 2020-21: Dividends from UK companies.
- Mr Gunnarsson was the sole director and shareholder of a limited company which was trading. The company was dissolved on 27 July 2021.
- Mr Gunnarsson followed HMRC guidance at the time of deciding to make his first claim, updated on 12 May 2020, which did not explicitly state that SEISS did not apply to limited companies. HMRC's guidance was updated again on 13 May 2020 to include this.
- The guidance made reference to HMRC seeking to recover any payments made due to fraud or inaccuracy.
- HMRC determined that Mr Gunnarsson was not entitled to SEISS because he was not Self-employed at the time the claims were made. HMRC raised an Assessment to recover the claims, and Mr Gunnarsson Appealed.
The First Tier Tribunal (FTT) found that:
- Mr Gunnarsson was not carrying on a trade in a business that had been adversely affected by COVID in the 2018-19 and 2019-20 tax years and did not intend to continue to carry on a trade in the 2020-21 tax year.
- At the time the SEISS claims were made, Mr Gunnarsson was only receiving employment income as an employee/director. He was no longer carrying on a trade as an individual.
- Mr Gunnarsson followed HMRC guidance at the time of making his first claim and held an honest belief that he was self-employed and met the criteria to make a claim.
- The appeal against the first claim was allowed on this basis.
- Mr Gunnarsson should have read the updated guidance before making the second claim, so the appeal against the second claim was dismissed.
HMRC appealed against the FTT's decision allowing Mr Gunnarsson's appeal against the first claim.
The Upper Tribunal (UT) found that:
- The FTT failed to apply the statutory eligibility criteria when evaluating the claims, which was an error of law.
- The lack of clarity in HMRC's SEISS guidance was a material factor on which the FTT relied to reach its conclusion.
- HMRC's guidance, prior to being amended, stated that only self-employed individuals or a member of a partnership could claim SEISS.
- Mr Gunnarsson did not fall into either of the above categories when he made his first claim on 18 May 2020.
- The original guidance necessarily implied that limited companies were ineligible for SEISS, and the updated guidance expressly stated as much.
- The legislation remained consistent throughout, stating that directors or employees of limited companies and the companies themselves were not eligible. HMRC guidance is just an interpretation of the law.
- Neither HMRC's original nor updated guidance suggested that Mr Gunnarsson was eligible for SEISS or that limited companies would qualify for support.
- Mr Gunnarsson's misunderstanding of the law or guidance did not justify special tax treatment.
- Due to the material errors of law in the FTT decision, the decision was set aside.
The UT re-made the decision, rather than remitting it to the FTT:
- When the claims were made, Mr Gunnarsson did not meet the eligibility criteria and was not entitled to claim under SEISS.
- Mr Gunnarsson's belief as to his entitlement was irrelevant.
- Mr Gunnarsson's appeal against HMRC's assessments was dismissed in relation to both claims.
Editor's comments
Mr Gunnarsson did not have any representation and used Artificial Intelligence (AI) software to draft his skeleton argument in the run-up to the hearing.
- His skeleton argument made reference to three previous FTT decisions to support his case, but the cases did not exist.
The Divisional Court has recently given guidance on the use of AI in court proceedings. It said that, “AI chatbots are now being used by unrepresented litigants. They may be the only source of advice or assistance some litigants receive. Litigants rarely have the skills to independently verify legal information provided by AI chatbots and may not be aware that they are prone to error. If it appears an AI chatbot may have been used to prepare submissions or other documents, it is appropriate to inquire about this, ask what checks for accuracy have been undertaken (if any), and inform the litigant that they are responsible for what they put to the court/tribunal.”
- The use of AI is increasing, and it is important to verify that the information generated is accurate before relying on it.
- There is a danger that inaccurate or fictitious information may be used as evidence in legal proceedings.
- In the case of HMRC v Marc Gunnarsson, HMRC checked the information presented to them. This might not always be possible, so decisions and, ultimately, law could be made based on inaccurate information.
In this case, the UT did not consider Mr Gunnarsson to be highly to blame because he was not legally trained or qualified, not subject to the same duties as a regulated lawyer or other professional representative and may not have understood that the information presented was fictitious.
- In the appropriate case, the UT may take matters like these very seriously, and there are sanctions for the misuse of AI by a party or representative.
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