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.