UT (Tax & Chancery) UT-2024-000098 - [2025] UKUT 00247 (TCC)

We are satisfied that the FTT did err in law in failing to apply the statutory eligibility criteria when evaluating the First and Second Claims.

The FTT appears to have been satisfied that the Assessment was: (i) within the limits HMRC’s authority (see Decision at [53]-[54]; (ii) in time (see Decision at [54]); and (iii) correct in amount (see Decision at [3]-[4] and [54]). The FTT stated at [54]:

Having considered and determined these matters, it remained for the FTT to consider whether the Respondent met the statutory eligibility criteria for SEISS, including those set out in paragraphs 3 and 4 of the Schedule to the First SEISS Direction. HMRC had made clear submissions, recorded at [40] & [46]-[48], as to why the Respondent did not satisfy the criteria in paragraphs 4.2(a), (c) and (d) of the Schedule in relation to both the First and Second Claims.

Although paragraphs 3.2 and 4.2 of the Schedule to the First SEISS Direction were quoted in the Decision at [31]-[32], the FTT failed to refer to or apply those provisions in reaching its conclusion (see [55]-[60] as set out above). The FTT failed to address the eligibility criteria at all and particularly those in dispute as outlined in HMRC’s submissions. By disregarding those criteria, the FTT failed to apply the law correctly, which amounts to an error of law.

Furthermore, the reasoning in [57]-[60] of the Decision, in particular, demonstrates that the supposed lack of clarity in HMRC’s SEISS guidance was the material factor on which the FTT relied to reach its conclusion to allow the appeal with respect to the First Claim and to dismiss it in respect of the Second Claim.

In so doing, the FTT determined the Respondent’s appeal based on its mis-interpretation of HMRC’s SEISS guidance and its seemingly unsupported conclusion as to HMRC’s rationale for updating it (see Decision at [57]-[60]):

By basing its conclusion on its view of HMRC’s non-statutory and non-binding guidance on eligibility rather than on any interpretation or application of the legislative criteria, the FTT erred in law. The guidance was at best an interpretative aid to the construction of any ambiguity in the legislation but the legislation on eligibility, as set out in paragraphs 3 and 4.1-4.2 of the Schedule to the First SEISS Direction, was perfectly clear.

Further and in any event, even if HMRC’s guidance was relevant to the construction of the Direction and the determination of the appeal, the FTT misinterpreted that guidance. In particular, it was the clear import of its original SEISS guidance prior to 13 May 2020 that persons trading via limited companies could not claim support under SEISS because it stated that only self-employed individuals or a member of partnership could claim or apply. That could never include directors nor employees of limited companies.

From the opening sentence of both the original and updated guidance on eligibility set out above, it is clear that in order to be eligible to claim, a prospective claimant must be a self-employed individual or a member of a partnership. The Respondent did not fall into either of those categories when he submitted the First Claim on 18 May 2020. By necessary implication, anyone who did not fall within either of those categories was not entitled to claim SEISS.

The actual or deemed state of knowledge of the ordinary or reasonable taxpayer or any individual claimant as to their entitlement to SEISS is irrelevant to their eligibility as we explain below. This is because the knowledge or understanding of a claimant as to their eligibility forms no part of the criteria for entitlement. Therefore, the extent of the public’s knowledge or understanding of HMRC’s guidance could not affect the eligibility in law as provided by the Schedule to the First Direction. Nonetheless, we do observe that the separate legal personality of limited companies is reasonably known, or at least readily understandable, to the public at large not simply to those with legal, company or tax expertise. Thus, to the reasonable and ordinary taxpayer it would be apparent that a necessary implication of the criteria in the guidance was that a person employed by or a director of a limited company would be ineligible for SEISS in respect of services provided by the company. It was reasonably clear from HMRC’s original guidance, even before the update of 13 May 2020, that persons trading through the use of limited companies were not eligible to claim under the SEISS because it would be the company performing the trade and not them personally.

HMRC added the following express statement to its guidance on 13 May 2020, five days before the Respondent made the First Claim and on the day when the portal first opened to allow any taxpayer to make any claim: “You should not claim the grant if you’re a limited company or operating a trade through a trust”. This was a negative statement or direction as to eligibility which simply reinforced the scope of the positive guidance as to eligibility. The Respondent does not appear to have checked the updated guidance before he made his First Claim on 18 May 2020.

Contrary to the FTT’s Decision, the addition of this negative statement (presumably to deter erroneous claims) did not change the message of HMRC’s original SEISS guidance. As set out above, HMRC’s earlier guidance did not include any suggestion that limited companies, or those trading them through them, were eligible to claim; the insertion of an explicit statement to that effect does not mean that the earlier guidance was unclear (contrary to the FTT’s assertion at paragraph [57] of the Decision). The FTT therefore misinterpreted HMRC’s earlier SEISS guidance.

The criteria quoted above from the original guidance above also make clear that “you” (i.e. the prospective claimant) must have traded in 2019/20, be trading at the time of the application (save for interruptions attributable to coronavirus) and intend to continue to trade in the tax year 2020/21.

In conclusion, the FTT erred by failing to apply the law correctly or at all, applying non-binding guidance instead of the applicable legislation, and in any event by misinterpreting the guidance on which it relied. There were material errors of law in making the Decision. For the reasons we explain below, had the FTT applied the statutory test as to eligibility, it would have dismissed the Respondent’s appeal as regards both the First Claim and the Second Claim.