A payroll manager at a dental practice has lost a First Tier Tribunal (FTT) appeal related to Coronavirus Job Retention Scheme (CJRS) overpayments
The FTT ruled that the dental services company was not entitled to CJRS payments for employees who had not been included on real time information (RTI) returns.
The appellant, Manu Patel, appealed against an assessment dated 9 July 2021 for £35,243.76 for the tax year ending 5 April 2021.
Following a routine HMRC compliance check, the tax authority raised an assessment related to Patel receiving CJRS payments for his employees – nine of which had not been included on a RTI return on or before 19 March 2020.
The CJRS provided funding for employers who furloughed their employees rather than making them redundant when businesses, like Patels, were forced to shut down as the result of the first lockdown.
HMRC paid CJRS grants totalling £55,965.19 for which Patel had made claims for April to September 2020 and for December 2020.
The facts were that of the nine employees included in the CJRS claims between April and September, only four had actually started employment before 19 March 2020.
As a result, Patel appealed to the FTT on the basis that it was wrong to use the 19 March 2020 as the date by which HMRC had to be notified.
On 10 March 2021, HMRC officer Smith opened a compliance check to ensure that the CJRS claims made by Patel had met the eligibility conditions.
Under the scheme, employers could claim a grant covering 80% of the wages for a furloughed employee, subject to a cap of £2,500 a month. To qualify, employers could claim for the scheme for furloughed employees that were employed on their PAYE payroll on or before 19 March 2020.
Where HMRC decides that an employer has claimed CJRS grants incorrectly, HMRC can recover the overpaid amount by making a tax assessment.
Patel provided a schedule confirming that all of the employees included in the claims had been included in the RTI full payment submission (FPS) sent to HMRC on or before 19 March 2020.
He also confirmed that the payroll was done at the end of each month. However, on checking the RTI system, Smith found that nine of the employees in the claims were not included in the RTI FPS before the required date.
On 5 May 2021, Smith contacted Patel to advise that further information was ‘still required’ and a telephone interview was arranged for 10 June 2021.
During the interview, the appellant’s representative confirmed that all of the employees included in the claims had been included in an RTI FPS sent to HMRC on or before 19 March 2020.
However, Smith stated that that was not the case and told him the names of the employees who had been included in the RTI FPS. He pointed out that the nine employees appeared to be ineligible.
In response, Patel said that employees who were employed in March 2020 would have been notified to HMRC at the end of March 2020 but the end of March RTI FPS was not made on time due to technical difficulties.
On 23 June 2021, Smith emailed Patel a pre-assessment letter and calculations advising that the CJRS claim calculation contained three types of error amounting to an overclaim of £35,243.67.
In response, Patel stated that he had ‘had difficulties’ operating the HMRC PAYE tool in April 2020. Smith responded by advising that technical difficulties in April 2020 ‘would not explain’ why employees were not notified to HMRC on or before 19 March 2020.
HMRC argued that none of the employees had been included on RTI returns within the relevant deadlines.
Taking into account the commencement dates for their employment and the fact that they were not paid until the end of each month, none of them could have been eligible even if the RTI returns had been made on time.
The FTT noted that although the claims may have been made ‘within the spirit’ of the CJRS, it could not consider such an argument.
Judge Anne Scott said: ‘This was a very sad case and we had sympathy with Mr Patel. The appellant is a company owned by his son and it provides dental services. Mr Patel's background is that he was at one time a costs manager in a construction business but he helps his son by looking after the payroll.
‘There is a high turnover of staff. He freely admitted to officer Smith that at times he had had difficulty with the payroll and he did get in touch with the HMRC helpline for assistance. He did not believe that he would have understood the legislation had he attempted to read it.
‘Whilst we have sympathy with Mr Patel there is no provision in the legislation for any extension of time or for any remission because of mistakes. There was no entitlement to those payments and therefore the appellant is liable to tax in respect thereof.
‘We accept that Mr Patel was trying to do his best and that the appellant had not profited by the incorrect claims.’
The appeal was dismissed.
For more information on how to manage a temporary downturn in work, visit BrAInbox today where you can find answers to questions like What is lay-off?
Read more from the latest BrAInbox Business News update:
Government rethinks Retained EU Law Bill following lack of support
450 directors banned for Covid fraud
