In Sinter Site Services Ltd v HMRC [2024] TC09343, the First Tier Tribunal (FTT) found that a family company's Coronavirus support claims for its various family members employees were calculated on future unpaid earnings and were excessive.
Sinter Site Services Ltd (SSSL), a family company, submitted Coronavirus Support Claims for five employees, totalling £175,689.59.
- All employees who received support payments were family members.
- It had been agreed at a family company meeting that remuneration would be increased in the coming tax year in line with the company's profits increasing. The employees, being family members, had up until that point been paid below the market average for their services.
- The claims for Coronavirus support were based on the future increased remuneration.
- HMRC disagreed with the method used to calculate the support payments and issued assessments.
During a compliance check, it became apparent that the employees were variable rate employees with different amounts paid each week. This was determined by the company’s use of the Real-Time Information (RTI) service.
As per paragraph 7.2 of the Coronavirus Direction, support payments for variable employees should be calculated as the higher of:
- The ‘average method’, is the average monthly salary paid to the employee for the 2019-20 tax year.
- The ‘look back method’ is the amount actually paid.
SSSL used neither of these methods and based their claims on future wages which had not yet been paid.
The FTT found:
- The method SSSL used was not statutorily permitted for basing the calculations support payments.
- Although they understood SSSL’s position and agreed the wages would have been paid in line with the increase in profits, the legislation is descriptive for how claims for variable employees should have been calculated.
- They agreed with HMRC’s decision not to issue Penalties.
The appeal was dismissed.
Useful guides on this topic
Covid 19: Tax Appeals
Government financial support to businesses affected by COVID-19 was made on a 'pay now, check later' basis after the start of 'lockdown' in March 2020. Appeals against decisions by HMRC which claw back support payments are now reaching the tax tribunals. Here we track tax appeals involving the employee Coronavirus Job Retention Scheme (CJRS), the Self Employment Income Support Scheme (SEISS) and also VAT
How to Appeal an HMRC Decision
Disagree with an HMRC decision? How do you appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?
Grounds for Appeal Toolkit
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External links
Sinner Site Services Ltd v HMRC [2024] TC09343
