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image of Covid cell | accountingweb | Another CJRS Case Win For HMRC – But What are the Lessons for Employers?

What can employers learn from CJRS wins for HMRC?


Many employers worked on a check-it-later policy when claiming support during the Covid pandemic. But the role of the payroll agent must also be questioned says Ian Holloway.

25th Jun 2024
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“Claim now, check later” was the motto for many employers claiming support under the Coronavirus Job Retention Scheme (CJRS). If the employer did not revisit the claim and do the checking, no problems – because HMRC will. 

The case of Digital Buying Partners Limited vs HMRC followed a similar pattern and highlighted that an excuse may be reasonable but this does not get in the way of applying the law.

The facts of the Digital Buying Partners (DBT) case versus HMRC are simply as follows.

  • Sanjeev Verma, managing director of DBT made CJRS claims for some employees via his payroll agent.
  • Even though these employees were employed before 19 March 2020, they were not on Real Time Information (RTI) submissions submitted to HMRC on or before 19 March 2020 – in fact, they were not submitted until May 2020.
  • In a compliance check, HMRC claimed this was not in line with the legislation (the Treasury Direction), there had been an overclaim and issued a notice of assessment to DBT.
  • DBT did not dispute the fact the employees were not on the RTI submissions and did not dispute the fact there had been an overclaim.
  • Despite appealing, the first tier tribunal (FTT) dismissed this and upheld HMRC’s determination of an overclaim.

However, there are two points that are worth exploring.

1. Reason for the appeal

Verma claimed he was unwell in March 2020 and unaware of the importance of the CJRS-relevant day of 19 March. Further, he was unsure whether the category of the worker meant that they were eligible in the first place.

Therefore, he claimed he had a reasonable excuse and quoted HMRC’s Compliance Handbook. Quite bluntly, the FTT said that it was not necessary to consider this appeal. It was clear that the employees were not on the RTI submission on or before 19 March 2020 and this was clearly a rule of law. While the Treasury Direction allowed for appeals in the cases of a late claim, there were no such tolerances when it came to claims that were ineligible in the first place.

2. What about the payroll agent?

Verma instructed his payroll agent to include the employees as part of the CJRS claim at the end of April/early May 2020. 

I know what a dilemma this is for payroll agents, bookkeepers and accountants. On the one hand, they are a paying client and you are performing a service, therefore, you do what they say. However, there is nothing in the judgment that indicates the payroll agent queried this at all. Instead, on realising that there had been an error, they “recounted” that an appeal could be made because a reasonable excuse existed – that the client had been unwell and uncertain and this was the reason for the non-compliance.

I wonder if the payroll agent was aware of the importance of the 19 March date and, if so, whether they relayed this to their client.

As I said, this really is a no-win situation for the agent and I do have sympathy – I think.

Were lessons learned?

The spirit of the legislation is immaterial. It’s what’s in the law that must happen and previous case law has proved this to be the case.

The reasonable excuse may exist when there is a failure to disclose liability for tax, failing to file on time or failing to pay on time, however, this does not apply where there is a failure to apply legislation. HMRC requires the employer and taxpayer to have taken “reasonable care” to meet their obligations.

Impossible situation

Which brings me to the final learning point. Agents were in an almost impossible situation throughout the operation of the CJRS. Payroll administration can be enjoyed; however this was a time when it had to be endured. Yet, referring back to the judgment, was it not responsible for the payroll agent to have known the law that they were administering on behalf of their client? Perhaps they did and this never formed part of the judgment.

At the end of the day, though, it’s all about compliance with the law. Administratively, this is an obligation to be shared between employer and agent. When it comes to penalties, it’s all employer and any sharing would depend on the wording of the service level agreement, wouldn’t it?

Replies (9)

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By Paul Crowley
25th Jun 2024 17:48

What exactly was the issue?
Sounds to me like 'it's not fair that I got it wrong, because if HMRC are not paying I would have sacked them'

Thanks (3)
Replying to Paul Crowley:
By FactChecker
25th Jun 2024 20:39

Based on the above info, my first thought was ... who on earth advised DBT to try that patently flawed appeal.

As a judge might say .. to fail to keep abreast of your responsibilities cannot be mitigated by what appears to have been an ill-advised attempt to outsource them; but then to bring this appeal to me on the basis of no more than a wing and a prayer ... oh well, Next!

Thanks (5)
By FactChecker
25th Jun 2024 20:35

"this really is a no-win situation for the agent and I do have sympathy – I think"
... well I don't!

Obviously I have no inside knowledge as to the facts of this case, but:
a) anyone who provides a Payroll service *should* (if only morally) be abreast of all current payroll legislation at all times - and be prepared for late nights double-checking anything that is new to them or, worse, where the guidance is changing almost weekly (and yes I do remember the fevered times of early CJRS);
b) they should also be clear that this exactly the sort of 'excuse' that lies behind HMRC's continuing demands to 'professionalise' the service providers - horrible word but they're creeping up on you in Payroll to require some form of registration/accreditation (as Agents).

There may still be some Payroll providers who operate the old bureau paradigm (no advice, put whatever you want in and we'll process it, but remember you're the one with the liabilities) - and there are undoubtedly still plenty of small accountancy or even bookkeeping business who think that Payroll is just an 'add-on' service (and assume that same 'not my problem' mantra to any type of problem if only because they don't know how to do much beyond 'push the buttons').

However anyone providing a professional Payroll service needs to be on top of all aspects to the same degree that they would demand of themselves if they were held liable for all their actions ... the days of SLAs as a convenient 'get out' mechanism are long gone.

Thanks (12)
By stepurhan
26th Jun 2024 08:05

The agent could, potentially, have had an excuse that in implementing a new system across all their payroll, this was overlooked. An entirely new set of rules to deal with and the undoubted pressure on accountants at that time could easily lead to such errors.

But finding the error and saying that a flimsy appeal should be fine instead of correcting it was not the work of a responsible professional.

Thanks (6)
By [email protected]
26th Jun 2024 09:48

Duty to carry out services with reasonable care and skill? Surely payroll company more likely to understand and keep abreast of regulations than clients- more so with big splash developments like furlough. Yes SLA could limit or define each party's responsibilities and liabilities- maybe that, in the awful current parlance is the "learning" to be acquired!

Thanks (1)
David Ross
By davidross
26th Jun 2024 09:50

What am I missing? We appeal against PENALTIES for reasonable excuse but no-one expects to get off paying the underlying liability.

Thanks (2)
By Roland195
26th Jun 2024 10:41

I believe in the case of the CVJRS, the spirit of the legislation absolutely was material. There was a point where guidance was being changed daily and with uncertainty over everything.

I have no stomach for these cases chasing after peanuts from technicalities like this will the wholesale fraud, profiteering & corruption goes unanswered.

They should confine themselves to establishing that the employees genuinely existed, were substantively employed and that the payments were passed on to them.

Thanks (0)
Donald MacKenzie
By Donald MacKenzie
26th Jun 2024 10:52

The report says "Even though these employees were employed before 19 March 2020, they were not on Real Time Information (RTI) submissions submitted to HMRC on or before 19 March 2020 – in fact, they were not submitted until May 2020."
IF the "employees" were employed before the end of February they would be on an RTI report submitted by 19th March.
HMRC is aware some employers ADDED "employees" once they believed they could collect furlough monies. Were these "cash in hand" people added as "employees" only to gain from furlough?
I had employer clients with new employees that started in early March who did NOT get furlough support.

Thanks (2)
Replying to Donald MacKenzie:
By FactChecker
29th Jun 2024 13:06

"IF the "employees" were employed before the end of February they would be on an RTI report submitted by 19th March"

... not strictly true - at least not on every occasion.

If you pay monthly and, for instance, have a cut-off date of the 23rd ... then your Feb payrun will not include any new employees who started between 24th-28th Feb - and so they will not be in your FPS (whether submitted on time or late "by 19th March").
In normal circumstances, this is not a problem - the omitted couple or so days of pay are added in to the March payrun - and everything gets reported (including the Feb start-date) in the March FPS.
But with CJRS, this possibility escaped the thoughts of the idiots who put the rules together ... and the end result was those employees who were intended by the politicians to be covered by CJRS were excluded by the rules.

Whether or not HMRC could have shown a little more flexibility is another matter ... but their love of automated systems made that unlikely - and they didn't!

Thanks (2)