Software in testing mode scuppers CJRS claimby
An employer was forced to repay Coronavirus Job Retention Scheme (CJRS) payments due to a payroll software glitch, which had meant the company missed the relevant RTI submission deadline.
Raystra Healthcare Limited (RHL) operated as a care service provider and temporary employment agency for the medical sector, with Mr K Adeniji as its sole director.
In April 2020, Adeniji attempted to make a claim under the Coronavirus Job Retention Scheme (CJRS) on behalf of RHL, but was unable to complete the application. He therefore contacted HMRC who called him back a few days later and advised that RHL had not submitted a Real Time Information (RTI) return since November 2019.
This came as a surprise to Adeniji, because he believed that RTI submissions had been made each period and the relevant PAYE and NIC paid over to HMRC. He investigated further and found that his payroll software had been updated in November 2019 and, for reasons unknown, all subsequent submissions had been made in 'test mode’.
Adeniji immediately rectified this and resubmitted the relevant returns, spanning November 2019 to April 2020. He then went on to submit the CJRS claims for six employees and later received the payments from HMRC.
However, that was not the end of the story. HMRC issued assessments in February 2021 to recover what it felt were overclaimed CJRS payments totalling £15,170.48. This was on the basis that a prerequisite of claiming the initial CJRS payment was that the relevant employees appeared on an RTI submission made on or before 19 March 2020.
All of the employees involved had commenced their employment after November 2019, therefore none of them had appeared on an RTI submission by 19 March 2020, meaning in HMRC’s view, no CJRS payments were due to RHL.
RHL disputed the matter with HMRC, before making an appeal to the first tier tribunal (FTT). This was made outside the appeals window, however HMRC offered no objections on this front, and so the appeal was heard.
HMRC’s argument was simple: the March 2020 deadline had not been met, as the necessary submissions had not taken place until April 2020.
Adeniji did not dispute the missed deadline, however he felt his claim should be allowed nevertheless. While the required submissions had not reached HMRC, RHL had made them from their side and, according to Adeniji, there had been no way to tell the software was in ‘test mode’.
He felt that a compassionate approach should be adopted, given it should now be clear to HMRC that the lack of submissions was not intentional and that RHL had cooperated fully since the issue came to light.
Finally, the CJRS amounts had been passed on to the employees and it was now no longer possible for RHL to request this back, leaving the company unfairly out of pocket.
It should be noted that in the absence of RTI returns, HMRC had been adding specified charges to RHL’s account to estimate the amounts due. Whether this had added to the confusion (given the amounts added and the payments made surely didn’t match, which should have raised alarm bells for both parties) is unclear.
The FTT found that there was not a lot to consider.
The Coronavirus Act 2020 sets out the circumstances under which a CJRS payment can be claimed. These circumstances clearly state that an RTI submission must have been made for any relevant employees on or before 19 March 2020, and do not include any exceptions or relaxations of this rule.
This is in contrast to other areas within the legislation that allow for a ‘reasonable excuse’ to exist, or for special circumstances to mitigate penalties. The FTT felt that the absence of such provisions was intentional and meant that either the March 2020 deadline was met or it wasn’t, regardless of extenuating circumstances.
Whilst not bound by any of the decisions, previous FTT cases which had involved this point were considered, with none of them finding any wiggle room or exceptions.
Finally, the FTT noted it had no discretion to allow an appeal for compassionate reasons, again noting that earlier cases had reached a similar conclusion, despite expressing sympathy for the taxpayer.
No further consideration was required and the appeal was dismissed.
It is surprising that the test submissions were not clearly flagged up by RHL’s software as, well, test submissions, rather than ‘live’ ones, as this is generally made very apparent to avoid outcomes such as these.
It is also somewhat surprising to find that there is no room for extenuating circumstances in the CJRS rules, as by their nature they relate to a period where many businesses were facing unexpected situations, many of which may have led to reasonable excuses.