Lucky Eyes Ltd v The Commissioner Of HMRC
[2024] UKFTT 868 (TC)
Laser Byte Ltd v The Commissioners for HMRC
9 July 2024
[2024] UKFTT 616 (TC)
First-tier Tribunal
A company tried to get more money from the government's furlough scheme by claiming its boss had a big pay rise. The judge said the pay rise wasn't real, and the company had to pay back some of the money, but less than the government first said they had to.
Key Facts
- •Laser Byte Ltd appealed an HMRC assessment concerning Coronavirus Job Retention Scheme (CJRS) clawback payments.
- •The sole director, Mr. Puttock, was the only employee.
- •HMRC questioned whether Mr. Puttock was a fixed-rate employee and whether a February 2020 pay increase was valid.
- •Mr. Puttock claimed a £2,000 monthly salary increase effective February 2020, but only reported it in March 2020 via RTI.
- •HMRC initially assessed £8,356.19, later revising to £7,427.92 after determining Mr. Puttock was a variable-rate employee.
Legal Principles
CJRS clawback mechanism: Wrongly paid CJRS support payments are recovered via an income tax charge equal to the wrongly claimed payment (Finance Act 2020, Schedule 16, paragraphs 8 & 9).
Finance Act 2020, Schedule 16, paragraphs 8 & 9
Definition of 'fixed-rate employee' under CJRS: An employee is considered fixed-rate if they are entitled under their contract to be paid a fixed salary in regular installments, regardless of hours worked (First Direction, paragraph 7.6).
First Direction, paragraph 7.6
Calculation of reference salary under CJRS: For fixed-rate employees, the reference salary is the amount payable in the latest salary period before 19 March 2020 (First Direction, paragraph 7.7); for variable-rate employees, it's the higher of the average monthly pay in 2019-20 or the amount paid in the relevant month (First Direction, paragraph 7.2).
First Direction, paragraphs 7.2 & 7.7
Burden of proof: The burden of proof lies on the appellant (Laser Byte Ltd) to demonstrate the validity of their CJRS claims.
Case Law
Outcomes
The appeal was dismissed.
Mr. Puttock was deemed a variable-rate employee, not a fixed-rate employee, and the £2,000 pay increase was not considered valid for February 2020.
The HMRC assessment was reduced to £7,427.92.
This reflects the recalculation based on Mr. Puttock's status as a variable-rate employee.
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