First SEISS case to hit the courts: an expert’s overview for freelancers
What was the Self-Employment Income Support Scheme?
A lifeline to many freelancers, the scheme offered five grants which could be claimed by self- employed individuals – albeit subject to certain conditions.
In what is thought to be the first SEISS case to reach the courts, the First-Tier Tax Tribunal has heard Joshua Peter Taylor v HMRC, writes former Revenue inspector Liz Coleman, tax expert at Integrated Dispute Resolution.
The case involved Mr Taylor making two claims for SEISS payments in May and August 2020. Both claims were successful and he received payments of £2,426 and £2,123.
A sole trader who become a limited company, and then claimed SEISS grants
Mr Taylor was not self-employed at the time that the claims were made, however. He had previously been self-employed, but his self-employment ceased in July 2018 when he became an employee of his own limited company, which effectively carried on the same occupation he did when he was a sole trader – that of a personal fitness trainer.
HMRC opened a compliance check into his two SEISS claims in October 2020 and subsequently issued a decision that because Mr Taylor was not self-employed when the claims were made, he should repay the payments received.
How the taxpayer tried to quash HMRC’s clawback
Mr Taylor appealed this decision on the following four grounds:
1. HMRC should have checked the information before making any grant payments to him;
2. The screenshots provided to him by HMRC, showing the online application form he filled in and appearing to list the conditions to qualify for SEISS, did not appear on his screen, and if the qualifying criteria was listed, he would not have made any claim under the SEISS.
3. HMRC were required to prove the screenshots explaining the conditions had been part of the taxpayer’s claims process, and finally;
4. In the absence of any of the points outlined above, the claim had been validly made.
Unfortunately for Mr Taylor, HMRC did not accept any of the points and having been unable to reach an agreement on March 19th 2021, assessments were raised (under paragraph 9 Schedule 16 of the Finance Act 2020), in the sum of £4,549.
The appeal was then heard in the First-Tier Tax Tribunal.
Who a ‘qualifying’ SEISS user is, in law, sealed Taylor’s fate
Significantly, HM Treasury’s Directions -- which set out the conditions for SEISS -- outlines that a “qualifying person” must:
(a) Carry on a trade the business of which has been adversely affected by reason of circumstances arising as a result of coronavirus or coronavirus disease,
(b) have delivered a tax return for a relevant tax year on or before 23 April 2020
(c) have carried on a trade in the tax years 2018-19 and 2019-20,
(d) intended to carry on a trade in the tax year 2020-21.
As Mr Taylor had not carried on a trade since July 2018, the appeal was not surprisingly dismissed.
‘Taxman should have checked’ didn’t wash
While Mr Taylor was of the opinion that HMRC should have checked the claim before making payment, this decision by the FTT against the taxpayer supports the principle that it is incumbent on the person making a SEISS claim to make sure that the claim was correct -- and lawful.
HMRC cannot be expected to examine every claim or return made to ensure that they are correct (and this is particularly the case with the SEISS, given the challenging circumstances in which the scheme was rapidly devised and rolled out).
Finally, it’s probably the last we’ll hear from Mr Taylor…
Given that there is no dispute over the fact that Mr Taylor in July 2018 ceased self-employment – probably one of the few issues that the appellant and HMRC did agree on -- it is not expected that any further appeals will be made.
14th October 2022