Tribunal dismisses CJRS claim by Convergence Management Consultants Ltd

Background of the Case

The First-tier Tribunal Tax Chamber recently delivered its judgment in the case of Convergence Management Consultants Ltd (CMC) against the Commissioners for Her Majesty's Revenue and Customs (HMRC). The case revolved around the entitlement of CMC to claim funds under the Coronavirus Job Retention Scheme (CJRS), a scheme introduced to support employers during the COVID-19 pandemic.

The Dispute

CMC, represented by its director Mr Khalid Mahmood, contested HMRC's decision to recover CJRS payments amounting to £46,619.48. These payments were claimed for Mr Mahmood's salary during the pandemic, based on his assertion of being 'reasonably entitled' to a salary of £40,000 per annum, which he previously earned from another employer.

Legal Arguments

The central legal question was whether CMC's claims under the CJRS could be based on earnings 'reasonably expected' to be paid, despite no actual salary payments being made to Mr Mahmood in the 2019-2020 tax year. The Tribunal examined whether Mr Mahmood qualified as a fixed rate employee and whether the various Treasury Directions governing the CJRS supported CMC's claims.

Tribunal's Findings

Tribunal Judge Anne Redston and Mr James Robertson found that the provision cited by Mr Mahmood did not apply to the entitlement to make a claim but rather to the reimbursement amount for those meeting the entitlement conditions. The Tribunal noted that CMC had not paid Mr Mahmood any salary in the 2019-2020 tax year, which was a prerequisite for making a CJRS claim under the First Direction.

Consideration of Directions

The Tribunal also reviewed subsequent Treasury Directions, including the Fifth Direction, which opened the CJRS to certain employees paid after the lockdown began. However, these provisions did not apply to Mr Mahmood, as CMC had previously reported payments to him on RTI returns. The Sixth and Seventh Directions were also considered but did not alter the outcome.

Conclusion

The Tribunal concluded that CMC was not entitled to the CJRS payments claimed for Mr Mahmood, as the conditions set out in the relevant Directions were not met. Consequently, HMRC's assessments to recover the payments were upheld.

Implications

This case underscores the importance of understanding the specific conditions and requirements of government support schemes like the CJRS. Employers must ensure compliance with the eligibility criteria to avoid disputes and potential recovery of funds by HMRC.

Learn More

For more information on employment law, see BeCivil's guide to UK Employment Law.