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First-tier Tax Tribunal's first decision on Coronavirus Job Retention Scheme

Posted on 29 July 2022

Over two years after the introduction of the Coronavirus Job Retention Scheme ("CJRS"), the First-tier Tax Tribunal has released its decision in respect of one of the first appeals to be heard in relation to overclaimed payments under the CJRS (Carlick Contract Furniture Limited v HMRC).

The facts of this appeal concern HMRC's attempts to recoup CJRS payments that were claimed in respect of two employees of the Appellant company. The employees in question commenced working for the company in February 2020, a month before the CJRS was introduced. Given their start date, the employees could not be included in the company's February payroll and instead were included in the late March payroll, whereby they were paid salaries for both February and March 2020.

HMRC argued that payments made to these employees did not count as "qualifying costs" in accordance with the CJRS Directions and therefore issued an assessment to claim the income tax due on the payments.

The Appellant company is a manufacturing business, typically supplying furniture to pubs, bars and restaurants. It argued that, owing to the impact of COVID-19 on the hospitality sector, the company was forced to close for two months, with all staff except for the executive management team being furloughed.

The two employees in question continued to receive their salary and the Appellant claimed payment on their behalf under the CJRS from 1 April 2020  until they were made redundant on 23 October 2020. HMRC formed the view that, based on the information provided, neither of the two employees were included in real time information ("RTI") provided to HMRC for PAYE purposes up to 19 March 2020 and therefore the claims were invalid and should be repaid.

The Tribunal referred to the First CJRS Direction (which sets out the functions of HMRC and defines "qualifying costs", which are costs that can be claimed under the CJRS). This states that "the costs of employment in respect of which an employer may make a claim for payment under the CJRS are costs which a) relate to an employee -  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". In relation to the definition of a "relevant CJRS day", a day is relevant if it is 28 February 2020 or 19 March 2020.

The Tribunal referred to paragraphs 8 and 9 of Schedule 16 of the Finance Act 2020, which sets out the consequence where a person is not entitled to a CJRS payment and HMRC's power to impose assessments. In response, the Appellant appealed the assessment and argued that it had followed the various guidelines "as best it could in a rapidly moving commercial and legislative environment". The intention of the CJRS to prevent people who had recently changed jobs from being made redundant and it was the Appellant's understanding that the scheme did apply to them. In terms of disclosing this, the Appellant reported that the employees employed had "changed dates" and considered this to be reasonable. The Appellant relied upon the guidance that was available at the time, which has since been amended a number of times and argued that the claims were made "in the spirit of the support" that was intended.

In making its decision, the Tribunal expressed its sympathies towards the Appellant's position but reiterated that the legislation "is quite clear", in that, to qualify for payment, the employee must be included in an RTI PAYE submission no later than 19 March 2022. Further, the Tribunal stated that whilst it did have scope to entertain arguments relating to the "spirit" of the CJRS, it could not comment on "public law" arguments on reasonableness and fairness. In conclusion, the appeal was dismissed, although the assessment amount was reduced from £22,018.97 to £20,504.25.


The CJRS was introduced in 23 March 2020, in response to the COVID-19 pandemic, to allow employers to rely upon furlough payments for their employees, instead of being forced to make them redundant. As referenced in our article published last year, due to the urgent introduction of the furlough scheme, there was limited guidance and information available to employers in understanding how the CJRS worked in practice and what steps had to be taken to ensure the CJRS rules were not breached. This led to widespread non-compliance with the CJRS rules and HMRC have since been on alert to recoup monies that have been claimed erroneously or fraudulently.

In light of this, it is interesting to see the Tribunal's approach in a furlough case that involves a breach of the CJRS Directions (due to a technicality, rather than a flagrant attempt at claiming funds fraudulently which have hit the headlines in recent years). Whilst this is one of the first judgments to be released on this topic since the implementation of the CJRS, it will no doubt be followed by further decisions, especially in light of HMRC's focus on recovering funds. 

Mishcon de Reya Partner Waqar Shah commented: "this is one of the first CJRS related cases, but seems to be fairly straightforward in comparison to what many suspected would make its way to a Tribunal hearing, especially given the relatively low amount at stake. Given that HMRC has increased its investigations in CJRS abuse (and formed its Taxpayer Protection Taskforce last year), it is likely that 2023 will see a number of Tribunal cases in this area, and may grapple with fact patterns where the circumstances of the overclaimed sums are not as clear-cut."

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