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

On 18 May 2020 and 8 September 2020, the Appellant made claims for the first and second SEISS grants respectively. At the time of making the claims, the Appellant was the sole director and shareholder of Machinegun Web Development Limited (“MWDL”). The Appellant was appointed as the sole director on the date of incorporation, 5 July 2018, and continued to act as such until MWDL was dissolved on 27 July 2021.

42…The Appellant’s Self-Assessment tax return for the tax year 2018/19, filed on 31 January 2020, showed a cessation date of 3 September 2018 for his self-employment. The Appellant also noted that, “as director of Machinegun Web Development Ltd, I received no income, benefits or lump sums and therefore no employee pages have been completed for this employment”.

Version 2 of the Appellant’s Self-Assessment tax return for 2018/19, received by the Respondents via ‘E-Amendment Timestamp’ on 30 December 2020, [showed] income from self-employment, [and] ‘Dividends from UK companies’ totalling £22,870.00.

The Appellant’s Self-Assessment tax return for the tax year 2019/20, showed he received ‘Dividends from UK companies’ totalling £19,336.00 and employment income amounting to £7,230.00 (the Appellant’s employment income was also reflected in his RTI records). The Appellant’s tax return did not show any income from self-employment.

The Appellant’s Self-Assessment tax return for the tax year 2020/21 showed he received ‘Dividends from UK companies’ totalling £3,178.00. Again, the Appellant’s tax return did not show any income from self-employment. Additionally, the Appellant has provided no evidence to show self-employment which is separate to the business conducted through his limited company during the relevant periods.

HMRC claimed that the Appellant did not meet the following requirements:

The carrying on of a trade the business of which has been adversely affected by reason of circumstances arising as a result of coronavirus or coronavirus disease (Paragraph 4.2(a)),

The carrying on of a trade in the tax years 2018/19 and 2019/20 (Paragraph 4.2(c)),

The intention to continue to carry on a trade in the tax year 2020/21 (Paragraph 4.2(d)).

…

Thus, when the Appellant made his SEISS claims, he was receiving only employment income as an employee/director of MWDL. This is reflected on his Self-Assessment tax return for 2020/21. Employment income is taxable under the Income Tax (Earnings and Pensions) Act 2003, not under ITTOIA 2005. HMRC therefore contended that the requirement at Paragraph 4.2(a) cannot be satisfied as, at the time of his claims, the Appellant carried on no other trades the business of which had been adversely affected by reason of circumstances arising as a result of coronavirus.

As the Appellant ceased self-employment on 3 September 2018, the Appellant also did not carry on a trade in the tax year 2019/20 and did not satisfy the requirement set out in Paragraph 4.2(c). Furthermore, at the time of the Appellant’s claims, as he had no trade which was adversely affected by coronavirus, HMRC submitted that the Appellant could not have intended to continue his trade in the tax year 2020/21 for the purposes of Paragraph 4.2(d).

…HMRC submitted that, at the time he made the claims and received the grants, he was no longer carrying on a trade as an individual. At this time, he had formed a limited company of which he is the sole director.

48.The Appellant states that, further to the First SEISS Direction, he met the qualifying criteria throughout and that he was ‘carrying on a trade’ and was an ‘individual’…

DISCUSSION AND DECISION

The Appellant claims that he read all the guidance and consulted his accountant. Although HMRC did not question the Appellant at the hearing about the accountant’s advice the Tribunal presumes that the advice was that the Appellant met the qualifying criteria.

The Appellant made his first application on 18 May 2020 having read the guidance which was updated on 12 May 2020. This updated guidance did not specifically state that a limited company could not apply. As a lay person the Appellant considered that he was self-employed as he was the only director and shareholder of MWDL. The fact that he had stated in his 2018/19 tax return as originally filed that he ceased self-employment on 3 September 2018 does not alter the Appellant’s belief that he was in fact self-employed as he was the only shareholder and director. He was simply completing the relevant questions on his tax return. The dividends which he declared in his 2018/19, 2019/20 and 2020/21 tax returns were his way of receiving income from his trade.

HMRC must have realised that its guidance did not make it clear that limited companies could not apply as halfway down the second page of their guidance updated on 12 May 2020 they state:

“You should not claim the grant if you're a limited company or operating a trade through a trust.”

This information was not included in previous guidance.

Although the guidance was updated on 13 May 2020 the Tribunal finds that, having sought advice from his accountant and read all the HMRC guidance up to 12 May 202[0], the Appellant held an honest belief that he was self-employed and that he met the criteria set out in paragraph 4.2 of Schedule to the First SEISS Direction.

The Appellant did not make his second claim until 8 September 2020 and as he made his second claim under Phase 2 he should have read the updated guidance. If he had done so he would have appreciated that the updated guidance on 13 May 2020 stated that a limited company could not apply.

The Tribunal accordingly allows the Appellant’s appeal against the first claim for £6,890.00 but dismisses the appeal against the second claim for £6,028.00.