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

At [58] of the Decision, the FTT concluded that, at the time the First Claim was made, the Respondent (having consulted his accountant and read the available guidance) held an “honest belief” that he was self-employed and that he met the criteria set out in paragraph 4.2 of the Schedule to the First SEISS Direction.

HMRC do not challenge the FTT’s finding that the Respondent held such an honest belief. Likewise, the UT accepts it.

Nonetheless, a misunderstanding of the law or guidance does not justify special tax treatment. Nor would it render a taxpayer entitled to a benefit or relief to which they would not otherwise be entitled by application of the strict statutory criteria. As Bingham LJ (as he then was) stated (albeit in the different context of payment of tax or receipt of relief rather than the receipt of a benefit such as SEISS), a taxpayer’s only legitimate expectation is that he will be taxed according to statute, not untaxed by concession or a wrong view of the law (see R v IRC ex p MFK Underwriting Agencies Ltd [1990] 1 WLR 1545 at 1569).

The law is beyond doubt: neither the First or Second SEISS Directions nor Schedule 16 to the Finance Act 2020 contains any provision permitting a claimant’s beliefs when a claim is made to be taken into account when evaluating their eligibility under the SEISS.

By applying an “honest belief” test in paragraph [58] of the Decision, the FTT departed from the test established in the legislation and based its conclusion in respect of the First Claim on a misinterpretation and misapplication of the law. This too constituted a material error of law.

The FTT did not rely on the Respondent holding any legitimate expectation as to his entitlement to SEISS in making its Decision in his favour in respect of the First Claim. Instead, it incorrectly relied on the Respondent’s honest belief as to his eligibility, as we have identified above. Likewise, no legitimate expectation argument was relied upon in any Respondent’s Notice to the UT identifying the issue as an alternative basis in law for the UT to uphold the FTT’s Decision. Nonetheless, the nature of the Respondent’s argument before the FTT and UT, understandably put in layperson’s language, comes close to asserting that he held a legitimate expectation as to his entitlement to SEISS.

In that regard, we should address the arguments of the parties briefly. In short, we accept Ms Inglis’s argument that legitimate expectation could not apply so as to entitle the Respondent to SEISS or to uphold any part of the FTT’s Decision.

First, there is a procedural bar to the Respondent relying on any such argument. In this case, the Respondent did not seek to argue that he held a legitimate expectation before the FTT, it formed no part of the FTT Decision, it was not raised as a point of law in response to HMRC’s appeal to the UT and the Respondent was not granted permission for it to be argued.

Second, any argument as to legitimate expectation may not fall within the UT’s jurisdiction to determine on appeal from the FTT as it is not clear whether it would fall within the FTT’s jurisdiction. Even if there had been any unequivocal statements or assurances given by HMRC to the Respondent in guidance or communications, HMRC argue that the proper context in which the Respondent could and should have raised a legitimate expectation argument would have been in proceedings for judicial review rather than on appeal to the UT. The Respondent has not brought judicial review proceedings and any claim would now long since be out of time. There is nothing within paragraphs 3, 4.1 nor 4.2 of the Schedule to the First Direction that confers upon HMRC nor the FTT any discretion that should be exercised in relation to the eligibility criteria. However, it has not been argued whether there was anything in relation to the statutory scheme for making and appealing assessments to recover SEISS sums paid (pursuant to Schedule 16, FA 2020 and sections 31(1)(d) and 49D Taxes Management Act 1970) that requires a discretion to be exercised by HMRC or the FTT that would import a public law jurisdiction into this appeal. As the UT has explained in Caerdav Ltd v HMRC[2023] UKUT 00179 (TCC), at [152]-[153]:

Third, we consider that the substance of the argument on legitimate expectation would have no merit in any event.

We are satisfied that even if there had been any ambiguity in: a) HMRC’s published SEISS guidance as to the eligibility of those trading as limited companies; and b) the communications sent by HMRC to the Respondent, these could not and did not give rise to a legitimate expectation that he was eligible for or entitled to support payments.

The authorities on legitimate expectation in the context of taxation are helpful to consider, albeit that a distinction may be made as to expectations regarding the eligibility to an HMRC administered benefit such as SEISS rather than the liability to tax. Ultimately, SEISS to which a person is not entitled will be recovered as if it is income tax.

In relation to a), we have addressed HMRC’s guidance on eligibility above. Neither HMRC’s original nor updated guidance contained any unequivocal statement or unambiguous assurance (or “a promise which is 'clear, unambiguous and devoid of relevant qualification”) that the Respondent was eligible for SEISS nor of the kind capable of giving assurance that persons trading as limited companies would qualify for support under SEISS (see R v Inland Revenue Comrs Ex p MFK Underwriting Agents Ltd [1990] 1 WLR 1545, 1569 and R (on the application of Aozora GMAC Investment Ltd) v HMRC [2019] EWCA Civ 1643 at [26]-[33]).

As explained by Sir Ross Cranston in Glint Pay Services Ltd, R (On the Application Of) v Commissioners for His Majesty's Revenue & Customs [2023] EWHC 1621 (Admin) at [36]-[38] there is a high threshold to satisfy before legitimate expectation can be made out in the taxation context:

As to unfairness, Rose LJ explained in Aozora that it "has to reach a very high level; it has to be outrageously or conspicuously unfair." She also said:

There was no assurance nor promise given to the Respondent in this case that he was entitled to SEISS and no unfairness caused to the Respondent by HMRC seeking to recover the payments to which he was not eligible. The original guidance necessarily implied that limited companies, and individual directors or employees trading through such, were ineligible for SEISS and the updated guidance expressly stated as much. In any event the law remained consistent throughout providing unambiguously that directors or employees of limited companies and the companies themselves were not so eligible.

The same applies in relation to b), the emails which were sent to the Respondent on 8 and 13 May 2020 by HMRC. HMRC’s communications with the Respondent did not contain any promise, unambiguous assurance or unequivocal statement that the Respondent would be eligible to receive SEISS payments.

The first email that the Respondent relied upon was one dated 8 May 2020 which he received from HMRC. It was generic in nature:

The next email from HMRC was dated 13 May 2020:

The first email simply explains to all customers (taxpayers) who might be eligible to make a claim for SEISS and how they might do so. The second email refers back to the first and at its highest states to all customers that, ‘We contacted you recently because we think you are eligible for a grant…The scheme is now open and every eligible customer has been given a date from when they can claim…’.

There was no positive assurance that the Respondent was eligible or that there had been specific consideration of his tax affairs. The guidance also contained reference to HMRC’s approach on a ‘pay now check later’ that it would seek to recover any payments made because of fraud or inaccuracy. This was consistent with the Government’s decision that there was urgent need for financial support during the pandemic. Even if the Respondent did rely on HMRC’s communications or guidance in good faith, it was not unclear and did not give him positive assurance of his eligibility to SEISS.

There was nothing within either communication sent by HMRC to the Respondent that assured or could reasonably be taken as assuring the Respondent personally that he was in fact or law entitled to or eligible for SEISS. It should also be noted that the context in which HMRC published its guidance and sent its communications was in the context of developing a support scheme and providing urgent financial relief for those taxpayers affected by coronavirus at the beginning of the pandemic in the UK in March 2020.

Likewise, the Respondent could not reasonably rely on any statement made by the gov.uk online portal when processing his claim to SEISS that might have suggested to him he was eligible. The Respondent did not challenge the finding which is set out at [49] of the Decision:

Again, there was no assurance nor anything which could reasonably be taken as assurance as to the Respondent’s eligibility from the use of the online portal and the manner in which his claim was made. Ms Inglis further highlighted that the Respondent’s later attempts to make claims to SEISS, following the First and Second Claims, would have made clear that the Respondent was not entitled to any payments because, once his 2019/20 tax return had been filed which declared no self-employed income, the UTR entered into the portal would have been linked to the Respondent’s return and any claim would have been declined.

For these reasons, any attempt to uphold the FTT’s Decision on an alternative ground of the Respondent’s legitimate expectation must fail.

We therefore allow the appeal on both grounds. There were material errors of law in the FTT Decision. The Decision must be set aside.