Selection of recent Tax Tribunal Cases

July 2022 – September 2022

Personal Lability Notice upheld as director found to be negligent

Case details: David Howick V HMRC [2022] TC08531

Mr Howick appealed against a personal liability notice (PLN) issued by HMRC, which made him personally liable for the outstanding Class 1 National Insurance Contributions (NIC) that were due from S P Surface Finishers Limited for the period 6 April 2015 to 5 August 2016.

HMRC can issue a PLN where a company fails to pay over the NIC due, and it is considered that the failure was attributed to the fraud or neglect of the director(s). HMRC must demonstrate, on the balance of probabilities, that there was a failure by the company to pay the NIC, that that failure was attributed to the neglect of one or more individuals and that the individual(s) was an officer(s) of the company at the relevant time.

Mr Howick became a director of S P Finishers on 13 April 2015 and whilst the company continued to submit RTI returns to HMRC and deduct PAYE and Class 1 NIC from its employees, none of these deductions was remitted to HMRC.  Prior to Mr Howick becoming a director, the employees’ PAYE and NIC payments were correctly deducted and paid to HMRC.

Considering all circumstances of the case, the Tribunal found that, during the relevant time, Mr Howick was the sole director of the company and did not meet the expected standards of a reasonable and prudent person. HMRC succeeded in demonstrating that the failure by the company to pay NICs was attributed to Mr Howick’s neglect. The appeal was dismissed.

Late filing penalties partly allowed

Case details: Henry Annafi V HMRC [2022] TC08522

Mr Annafi appealed against late filing penalties issued by HMRC for the 2016-17 and 2017-18 tax years. At the hearing Mr Annafi accepted that he did not have a reasonable excuse regarding the return for the 2016-17 tax year but remained adamant that he had a reasonable excuse for the 2017-18 tax year.

Mr Annafi contended that he had repeatedly told HMRC that he had ceased self-employment in early 2017 and was therefore not within the self-assessment regime for the 2017-18 tax year and had, as instructed by HMRC, submitted the 2016-17 return in March 2019 with an accompanying letter explaining that his self-employment had ceased. 

It was accepted by HMRC that Mr Annafi would have had a reasonable excuse in respect of 2017-18 tax year if the 2016-17 return and accompanying explanation letter had been sent in.  HMRC stated that they had not received the return or the letter.

The Tribunal found that on the balance of probabilities Mr Annafi had filed his 2016-17 tax return and accompanying letter and therefore had a reasonable excuse regarding the penalties for the 2017-18 tax year. The penalty appeal for the 2016-17 tax year was dismissed with the penalty appeal for 2017-18 upheld.

Payment to employees did not qualify under the Coronavirus Job Retention Scheme (CJRS)

Case details: Carlick Contract Furniture Limited V HMRC [2022]  TC08543

The company appealed against HMRC assessments to claim back payments made under CJRS, to which HMRC considered the company was not entitled, for two employees in respect of claims covering the period April 2020 to October 2020.

Both employees commenced working for the company on 24 February 2020 and, due to the company’s internal payroll process, they were not processed in time to be included on February’s payroll. They were first included on the RTI returns submitted to HMRC on 25 March 2020.

Whilst it was not disputed that the two individuals were employed by the company at the time the scheme was introduced, their costs were not permitted to be included in the company’s CJRS claim. This was because the claim could include only those employees who had been employed, received payment and had been included on the RTI submission on or before 19 March 2020.

The company argued that the claims were in line with the spirit of the scheme and that their appeal should be allowed as the company had acted reasonably in including the two employees in its claim, whilst trying to follow the rapidly-changing guidelines. The Tribunal found that the CJRS Directions clearly determined eligibility for the scheme, and it did not have the jurisdiction to entertain the company’s arguments, as its role was to adjudicate the law. The appeal was dismissed.

Appellant not eligible for Self-Employment Income Support Scheme (SEISS) grant

Case details: Joshua Peter Taylor V HMRC [2022]  TC08576

This case involves an appeal against an assessment raised by HMRC relating to payments made under the SEISS for the 2020-21 tax year on the basis that HMRC considered Mr Taylor was not eligible to receive the payments.

Mr Taylor submitted two claims under the SEISS in May 2020 and August 2020, although he had ceased self-employment on 31 July 2018 and had become as director of his own limited company on 13 July 2018, thereafter being employed by his company.

It was contended that Mr Taylor had thought that the only eligibility criteria to be satisfied in order to receive the grant were that he had traded as self-employed in the years 2016-17 to 2018-19. It was further contended that he had not seen any of the eligibility criteria when he completed the online application and that HMRC would have had full access to his tax returns and could/should have checked the information before making the payments.

The Tribunal found, as fact, that Mr Taylor was not self-employed when he made the applications for the SEISS, that he had ceased to trade as self-employed on 31 July 2018, and that the grants were only available to the self-employed and that he was never eligible for them. The appeal was dismissed.