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

We are satisfied that we should re-make the Decision rather than remit it to the FTT in circumstances where we have all the relevant material before us and the primary facts are not in dispute. To do otherwise would cause unnecessary delay and not be just nor fair to the parties.

In re-making the decision, pursuant to section 12(4) of the Tribunal Courts and Enforcement Act 2007 we may make any decision which the FTT could make if the FTT were re-making the decision and may make such findings of fact as we consider appropriate.

When the First and Second Claims were made (i.e. in May and September 2020), the Respondent was not a “qualifying person” within the meaning of paragraph 3.2 and 4.1 of the Schedule to the First SEISS Direction, such that he was not entitled to claim support under the SEISS.

This is because he did not satisfy three of the eligibility criteria in paragraph 4.2 of the Schedule to the First SEISS Direction as submitted by HMRC.

First, the Respondent did not satisfy the condition in paragraph 4.2(a) of the Schedule to the First SEISS Direction, in that he was not carrying on a trade.

When he made the First and Second Claims, the Respondent was the sole director and shareholder of Machinegun Web Development Limited (“MWDL”), which was incorporated on 5 July 2018 and dissolved on 27 July 2021 (see Decision at [5]). He had previously carried on a self-employed trade as a web developer, but his self-assessment return for the tax year 2018/19 showed a cessation date of 3 September 2018 for his self-employment (see Decision at [42]).

HMRC accept that the Respondent carried out the same type of activity at all relevant times, whether as a sole trader or as a director of MWDL. However, as a limited company, MWDL was a legal person distinct from the Respondent, and once the Respondent began acting or trading through the use of MWDL, it was that corporate person (and not the Respondent himself) that carried on the activities or the trade. We endorse the decision in Joshua Taylor as including the correct analysis and interpretation of the law.

Accordingly, the Respondent did not satisfy the condition in paragraph 4.2(a) of the Schedule to the First SEISS Direction on the basis of MWDL’s trading.

Further, the Respondent’s self-assessment returns for the tax years 2019/20 and 2020/21 did not show any income from self-employment (see Decision at [43]-[45]). Moreover, the Respondent provided no evidence that he carried on any other self-employed trade (separate to the business of MWDL) between that cessation date and the dates when his SEISS claims were made (see Decision at [45]).

Even apart from the issue of separate legal personality, the Respondent’s activities for MWDL and MWDL’s trading did not amount to him carrying on a trade within the meaning of paragraph 13 of the Schedule to the First SEISS Direction.

As set out above, paragraph 13 restricts the meaning of “trade” to a trade, profession, or vocation the profits of which are taxable under Part 2 of ITTOIA 2005, which deals with income tax as it applies to trading income from self-employment. The Respondent’s amended return for 2018/19 does show some self-employment income from the time prior to September 2018 when he ceased trade as a self-employed individual but thereafter, in the same tax year, from dividends as a director of MWDL as incorporated. The Respondent’s self-assessment returns for the tax years 2019/20, and 2020/21 do not disclose any income from self-employment, but do disclose “Dividends from UK companies” and/or employment income (see Decision at [42]-[45]).

The Respondent’s receipts from his activities for MWDL were therefore taxable as dividend income (under Part 4 of ITTOIA 2005) or as employment income (under ITEPA 2003 (Footnote: ¹)), but not as trading income under Part 2 of ITTOIA 2005, as required by paragraph 13 of the Schedule to the First SEISS Direction. This is another reason why the Respondent’s activities for MWDL did not amount to a trade for purposes of the SEISS.

Further and for the avoidance of doubt, MWDL itself was not eligible to claim support under the SEISS either – firstly because it was not an individual (and so did not satisfy condition (f) in paragraph 4.2 of the Schedule to the First SEISS Direction). Moreover, as a UK resident company, MWDL’s profits were chargeable to corporation tax, and not to income tax under Part 2 of ITTOIA 2005 (see ss. 2, 3 and 5 of the Corporation Tax Act 2009), with the result that MDWL’s activities did not constitute a trade within the meaning of paragraph 13 of the Schedule.

The Respondent’s beliefs as to his entitlement to SEISS, or even his beliefs as to his continued self-employed status post September 2018, however honestly held, are irrelevant even if we, like the FTT, have some sympathy for his position. While the Respondent states that at the time he believed the UTR number was a reference only for the self-employed, he now understands that it is simply a unique tax reference numbers for taxpayers generally: the self-employed, the employed or other taxpayers. Even if the position in which the Respondent now finds himself is rather unfortunate, he was neither self-employed nor trading when acting as a director (and / or employee) or shareholder of MDWL and when it supplied its services from September 2018 onwards.

Second, the Respondent did not satisfy the condition in paragraph 4.2(c) of the Schedule to the First SEISS Direction, in that he did not carry on a trade in tax year 2019/20.

As noted above, the Respondent’s self-employment ceased on 3 September 2018, and he provided no evidence that he carried on any other self-employed trade between that date and the dates when the First and Second Claims were made (see Decision at [42] and [45]).

Third, the Respondent did not satisfy the condition in paragraph 4.2(d) of the Schedule to the First SEISS Direction. As he was not carrying on a trade at the time of making the First and Second Claims, he could not “intend to continue” to carry on a trade in tax year 2020/21.

We remake the Decision on the basis of the test for eligibility in paragraphs 3 and 4.1 & 4.2 of the First SEISS Direction. The Respondent was not eligible for nor entitled to any payment by way of either the First or Second Claim to SEISS. There is no other challenge to the lawfulness of HMRC’s Assessment to recover the payments made in respect of the First and Second Claims.

The Respondent’s appeal against HMRC’s Assessment is therefore dismissed and the Assessment to recover the payments made under both Claims is confirmed. HMRC have also confirmed to the Respondent that they only seek to recover interest upon the Assessment. They do not seek, and never have sought, any penalties against the Respondent in respect of the SEISS payments.