Director’s social media posts invalidate CJRS claim
By Justine Riccomini, Head of Tax (Employment and Devolved Taxes)
7 June 2023
Justine Riccomini explains why a director’s activity on social media during the pandemic led to HMRC denying a coronavirus job retention scheme (CJRS) claim and winning at the tax tribunal.
During the height of the coronavirus pandemic, businesses were trying to cope with the loss of business and adjustment to new circumstances whilst attempting to keep up with seven different iterations of the coronavirus job retention scheme (CJRS) treasury directions.
Statutory duties
One example of how a company got it wrong and had a claim turned down was recently highlighted in the case of Glo-Ball Group Limited v HMRC [2023] TC08823. The company appealed to the First Tier Tribunal when HMRC turned down a claim for furlough in respect of one of the directors, who had published a small number of posts on the company’s Facebook page during the furlough period. The appeal followed a statutory review of the case findings, as well as an unsuccessful alternative dispute resolution process.
HMRC considered that regardless of the number of posts, the content being posted constituted an act (or acts) of work which did not amount to ‘statutory duties’ – the only work directors of incorporated business were permitted to perform – which are defined in ss. 171-177 of the Companies Act 2006 and include signing time-critical legal documents and finalising accounts to submit to Companies House, etc.
Social work
Key to the success or failure of the claim was whether what the director in question had been doing represented ‘work’ or ‘statutory duties’, and how often these activities had happened. The company was a business which hosted children’s events and clubs, as well as parent and baby sessions.The director continued to post information on to the company’s main Facebook page during the furlough period, which included advertising, promotion of other company Facebook pages, and commentary on some of the work which the company had undertaken during lockdown.
It was clear that the social media activity during lockdown was reduced significantly from some 15 hours a week prior to lockdown, to around five minutes per month during lockdown – however, the type of work undertaken was enough to allow HMRC to conclude that the strict CJRS rules had been breached.
Timing
Timing of the posts was crucial. In this case, the time lag between posts did not leave a clear period of 21 days in which the Director had ceased all work during the initial furlough period of March to June 2020 inclusive. Due to this, the director was also automatically rendered ineligible to claim furlough for the subsequent so-called “flexible furlough scheme” period of July to October 2020 inclusive.
FTT findings
The First Tier Tribunal (FTT) found that the director had been carrying out work which did not amount to ‘statutory duties’ whilst claiming furlough throughout the period between 23 April 2020 and 18 December 2020 and the payments, totalling £3,449, were denied. It was enough that one single piece of work was sufficient to derail the claim, whether that work succeeded in generating income or not.
Conclusion
It is essential that agents continue to have conversations with their clients about furlough claims, which are investigated by HMRC on an ongoing basis, and take proactive action where errors are found to have arisen. Such misdemeanours can cause HMRC to increase a business’s tax risk rating, which can result in increased levels of scrutiny of that business by HMRC over a number of years until they have satisfied themselves that the risk has diminished to a satisfactory level.
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