TC09606 - [2025] UKFTT 00958 (TC)

This appeal concerns a narrow point of interpretation of paragraph 7.12 of the CJRS direction.

We record the following matters that were not in dispute between the parties, but are necessary pre-cursors to reaching a conclusion on whether there has been an overclaim of CJRS:

We find as a matter of fact that Mr Langan and Ms G were both “fixed rate employees” within the CJRS Direction. We did not understand that Mr Tann was challenging this factual position.

This means that their reference salaries must be calculated in accordance with paragraph 7.7 of the CJRS Direction, which provides that this salary is the “amount payable to the employee in the latest salary period ending on or before 19 March 2020”.

As set out in the background facts above, both Mr Langan and Ms G were paid on a weekly basis. The RTI submissions for DPL were provided to us. They showed a submission dated 13 March 2020 which showed a payment of £100 for Mr Langan and £191.23 for Ms G that was to be paid on 14 March 2020.

On this basis, the reference salary of Mr Langan under paragraph 7.7 of the CJRS Direction was £100 a week and for Ms G it was £191.23 a week.

However, this reference salary can be adjusted by virtue of the later parts of paragraph 7 of the CJRS Direction. In this case the relevant adjustment, according to the Appellant, is paragraph 7.12. However, in order to understand 7.12, it is also necessary to consider the starting point in paragraph 7.1.

We will first consider our reading of the wording in the CJRS Direction and then consider whether wider commentary and/or other case law sheds any light on this interpretation.

Paragraph 7.1 is dealing with what amounts an employer can claim. In particular, 7.1(b) requires that the employee is being paid-

“(i)

£2500 or more per month (or, if the employee is paid daily or on some other periodic basis, the appropriate pro-rata), or

(ii)

where the employee is being paid less than the amounts set out in paragraph 7.1(b)(i), the employee is being paid an amount equal to at least 80% of the employee’s reference salary.”

The first thing we note is that these are mutually exclusive conditions. If the employee is being paid £2500 or more per month, then there is no need to consider the second limb. Only if the employee is earning less than £2500 per month is it relevant whether they are being paid an amount equal to at least 80% of their reference salary.

Turning to 7.11:

“Where paragraph 7.12 applies, the sum of the original payment described in paragraph 7.12(a) and the further amount described in paragraph 7.12(c) must be treated as having been paid at the time of the payment of the original payment for the purposes of paragraph 7.1(b)(ii).”

This is a deeming provision whose only purpose is to deem the timing of the payment of the “further amount” in 7.12(c) to have been paid at the same time as the original payment. We also note that it only deems such a payment to have been paid “for the purposes of paragraph 7.1(b)(ii)”. Therefore the deeming provision is only relevant for those employees who are paid less than £2500 per month.

The main provision under consideration is 7.12, which provides:

“This paragraph applies where-

(a)

in the period beginning on 1 March 2020 and ending on the third day after the making of this direction an amount by way of wages or salary is paid in respect of a period of employment (“the original payment”) to an employee,

(b)

the original payment is less than the amount required by paragraph 7.1(b)(ii) for the purpose of claiming CJRS,

(c)

before making a CJRS claim in respect of the original payment the employer pays the employee a further amount (“the further amount”) in respect of the period of employment to which the original payment relates, and

(d)

the sum of the original payment and the further amount meets the requirements of paragraph 7.1(b)(ii).”

Applying 7.12(a) to our current facts:

We find that each of these payments were separate “original payments” for the purposes of 7.12(a). This is on the basis that 7.12(a) refers to payments being made in respect of “a period of employment” and both Mr Langan and Ms G were paid weekly in respect of each week’s period of employment.

Paragraph 7.12(b) requires that each “original payment” was less than the amount required by paragraph 7.1(b)(ii). The wording of this paragraph is that the person is being paid “an amount equal to at least 80% of the employee’s reference salary”. Therefore, for 7.12(b) to be met, the employee would have to be being paid less than 80% of their “reference salary”. As that reference salary has been determined above as being £100 per week for Mr Langan and £191.23 for Ms G, this condition is not met. Both were being paid 100% of their weekly reference salary until 4 April and in excess of their weekly reference salary thereafter.

Paragraph 7.12(c) requires that a further payment is made to the employee in respect of the same period as the original payment. As determined above, the further payments were not made in respect of the original payments made between 1 March 2020 and 18 April 2020. The payments made on 11 and 18 April 2020 were made not as “further payments” in respect of the same periods of employment, but as new “original payments” in respect of two new periods of employment, being the two later weeks in April. Therefore, the requirements of paragraph 7.12(c) are not met.

Paragraph 7.12(d) requires that the sum of the original payment and the further amount meets the 7.1.(b)(ii) requirements, i.e. the employee is being paid at least 80% of the reference salary. Since we have established that the original payments already met this requirement and that no further payments were made, it is not necessary to consider this condition.

Therefore, on the basis of interpreting the clear words of the law, the amount that DPL can claim is not adjusted by virtue of paragraph 7.12 and the appropriate claims would have been for the reference salary, as determined in accordance with paragraph 7.7.

Mr Tann invited us to consider that the speech of the Chancellor should be considered in interpreting the wording of the CJRS Direction, particularly because the direction was not issued until 15 April and employers were therefore making decisions on the basis of what was announced before the detail was released in the CJRS Direction.

The extent to which external materials such as ministerial announcements can be taken into account in construing legislation was considered by the Supreme Court in R (on the application of O) v Secretary of State for the Home Department [2022] UKSC 3 where Lord Hodge, in the majority decision, said in relation to ministerial statements:

Having set out above our interpretation of the relevant provisions of the CJRS Direction, we do not consider that they are ambiguous or obscure or that they lead to an absurdity. Mr Tann suggested that the provisions must allow for a person to receive a pay rise. There is nothing in the CJRS Direction that prevents the employer from giving a pay rise, but, due to the definition of a reference salary, the pay rise would not lead to an increase in the amount that the employer can reclaim from the government under the CJRS. We do not consider that this is an absurd conclusion, particularly in the context of a system of grants that was established in a very short time frame in order to provide support to employers for the cost of staff that could not work due to the pandemic. It is undoubtedly the case that this system did not cater for each and every situation, but that doesn’t necessarily render it absurd.

Mr Tann made a further argument that, if it is not possible to “top up” under paragraph 7.12, then how would an employer do it? We took that as a suggestion that the provisions interpreted as HMRC suggest would lead to an absurdity. We disagree. Mr Tann’s argument is predicated on his interpretation of the phrase “top up”, which, in his view, must enable an employer to decide to change a person’s salary and claim back the higher amount under the CJRS from the government. We note that the legislation does not use the phrase “top up”, but even if it did, it would need to be read in the context of the legislation, which provides for employers to be able to claim certain specified and restricted amounts from the government during the course of the pandemic. There is nothing in the legislation, either express or implied, that could be read as enabling an employer simply to increase a salary after the date set for determining the reference pay and expect that amount to be claimed from the government.

Even if we could consider it, we do not consider that the speech made by the Chancellor is clear and unequivocal to the point under consideration. It is helpful to put the statements that Mr Tann relies on in the speech made by the Chancellor on 20 March 2020 into context:

“Today I can announce that, for the first time in our history, the government is going to step in and help to pay people’s wages.

We’re setting up a new Coronavirus Job Retention Scheme.

Any employer in the country – small or large, charitable or non-profit - will be eligible for the scheme.

Employers will be able to contact HMRC for a grant to cover most of the wages of people who are not working but are furloughed and kept on payroll, rather than being laid off.

Government grants will cover 80% of the salary of retained workers up to a total of £2,500 a month – that’s above the median income.

And, of course, employers can top up salaries further if they choose to.

That means workers in any part of the UK can retain their job, even if their employer cannot afford to pay them, and be paid at least 80% of their salary.

The Coronavirus Job Retention Scheme will cover the cost of wages backdated to March 1st and will be open initially for at least three months - and I will extend the scheme for longer if necessary.”

Read in that context, the phrase “employers can top up salaries further if they choose to” clearly refers back to the fact that the scheme being introduced allows employers to “cover most of the wages”. This is further reflected in the fact that the following sentence refers to employers being unable to afford to pay their furloughed staff but being able to continue to pay them 80% due to the availability of the CJRS grants.

The Upper Tribunal’s decision refusing permission to appeal in Bandstream Media also supports this conclusion in paragraph 34:

“The reference to employers being able to top up salaries further if they chose to do so, was clearly a reference to making good the 20% of the reference salary which could not be claimed pursuant to paragraph 8 of the Direction.”

In our view, this speech does not provide unequivocal support for the opportunity that Mr Tann thinks he found, i.e. to claim more from the government than was previously being paid to employees by changing the amount payable after the announcement of the CJRS.

Mr Tann also invited us to consider that Bandstream Media was wrongly decided in that it concluded that paragraph 7.12 could only be used for correcting a claim, not for topping up, albeit that he was not able to point us to the parts of the decision that he considered to be wrong. He also sought to distinguish this case on the facts, specifically that in Bandstream media the top up payments were made in the same tax year, but in DPL’s case, the top up payments were made in the next tax year.

HMRC suggest that Bandstream Media is persuasive authority that supports their position and invite us to follow it. HMRC highlight the following paragraphs:

“23.

We were told by HMRC that the purpose of paragraph 7.12 was to cater for situations where an employee was due to be paid a certain amount but as a matter of fact, was paid less than 80% of that amount. So, an employee who was due to be paid £1,000 received only £750 for some reason. Paragraph 7.12 enables the employer to pay the additional £250 and thus calculate a support payment on the basis of the salary of £1,000 rather than being restricted to the £750 which was actually paid to the employee.

24.

And paragraph 7.12 certainly caters for this situation.

25.

We have based the foregoing interpretation on a literal interpretation of the legislation. And we have arrived at the same conclusion based on a purposive interpretation. This allows us to consider the purpose for which the legislation was introduced, but it must be emphasised, that the question is whether the construction of the statutory provision applies to the facts as found. Words are to be given ordinary meanings, and it is to be presumed that Parliament did not intend that to be either injustice or absurdity when introducing those statutory provisions.

26.

It is our view that the purpose of the legislation is, as submitted by HMRC, to cater for the situation which has been suggested by them, at [23] above. It was not intended to allow an employer, after the introduction of the scheme, to inflate an employee’s wages and thus, effectively, have the taxpayer underwrite an employee’s salary. This would drive a coach and horses through the legislation which was designed to fix an employee’s salary to that recorded on the latest RTI submission prior to 19 March 2020. To interpret the legislation otherwise would lead to an injustice.”

As noted above, Bandstream Media, also advised by Mr Tann, applied for permission to appeal against the First-tier tribunal’s decision. The Upper Tribunal refused permission to appeal in a decision published with citation [2024] UKUT 00306 (TCC). The decision rejected Mr Tann’s grounds of appeal relating to the interpretation of paragraphs 7.1 and 7.12. We note in particular the following paragraphs of that decision:

“[22] Bandstream further argues that the FTT’s approach means that Bandstream is not able to give Mr Smith a pay rise. That is not the case. It could give Mr Smith a pay rise, but it would not be able to claim reimbursement of the costs of employment above 80% of the reference salary paid to Mr Smith.”

…

“[30] I am also satisfied that paragraph 7.12 is not directed towards pay rises. It is clear that paragraph 7.12 applies to amounts paid to employees in the period of uncertainty between 1 March 2020 to 18 April 2020 arising out of the pandemic which for whatever reason were less than an employee’s reference salary. Claimants were then given an opportunity to “top up” the original payment at any time before making a claim so that it met the 80% threshold required by paragraph 7.1(b)(ii). The Direction contains no provision for the reference salary to be re-calculated in the event of an increase in salary.”

We agree with the original reasoning of the First-tier Tribunal in Bandstream Media and that this reasoning was not disturbed by the Upper Tribunal in their decision on permission to appeal. We do not see any rationale for distinguishing DPL from Bandstream Media on the facts since there is nothing in paragraphs 7.1, 7.7 or 7.12 of the CJRS Direction that hangs on whether further payments were made in the same or a different tax year.

For the reasons set above, DPL was therefore only entitled to make claims under the CJRS Direction on the basis of the reference salary calculated in accordance with paragraph 7.7. Paragraph 7.12 does not apply to DPL because the conditions in 7.12(b) and (c) are not met.

HMRC argued that, in accordance with the review conclusion letter, supported by the witness evidence of the decision-making officer, the assessments should be increased by:

DPL did not make any submissions regarding the amount of the assessments, either in relation to the main calculations or the small adjustment upwards based on the varied percentage and the claims for employer’s NICs.

On the balance of probabilities, we find that the claims made were excessive in those respects and therefore increase the assessments in accordance with the review conclusion letter.

For the reasons set out above, we dismiss the taxpayer’s appeal against the assessments, as amended on review.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.