Top Notch Accountants Limited & Anor v The Commissioners for HMRC

This is two appeals which have been directed to be heard together because they concern the same subject matter.

The first appeal is an appeal against three penalty assessments issued to Top Notch Accountants Limited (TNAL) on 19 September 2023 for its alleged failure to notify (FTN) HMRC of its liability to income tax as a result of its claiming and receiving Coronavirus Job Retention Scheme (CJRS) payments that it knew that it was not entitled to.

The three penalty assessments under appeal are as follows:

The Respondents (HMRC) are not opposing TNAL’s appeal against the Second and Third penalties because since the penalties were issued, HMRC has accepted that there is no underlying tax liability that TNAL should have notified for these periods.

The second appeal is against a personal liability notice (PLN) issued to Mr Nazrul Islam (NI) on 20 September 2023 making him personally liable for 100% of the FTN penalties issued to TNAL on 19 September 2023. NI can only be held personally liable for valid FTN penalties and so HMRC is not opposing NI’s appeal against the PLN in respect of the Second and Third Penalties as there is no FTN penalty in respect of these periods for the reasons set out above.

CJRS was introduced when the first Covid lockdown was announced in March 2020. It provided funding for employers who furloughed their employees rather than making them redundant, when businesses were forced to shut down as a result of the lockdown. The CJRS contained provisions designed to ensure that it only applied in relation to employees who were employed before the lockdown, and to enable HMRC to claw back any payments that had been made in respect of employees who did not satisfy that condition.

These provisions included the requirement that employers could only claim CJRS for furloughed employees for whom HMRC received PAYE Real Time Information (RTI) in the form of a Full Payment Submission (FPS) by specific dates. For CJRS grants covering the periods up to 31 October 2020 the employee had to be included in an RTI FPS that was received by HMRC by 19 March 2020. For CJRS grants covering periods from 1 November 2020 to 30 April 2021 the employee had to be included in an RTI FPS submission received by HMRC after 19 March 2020 and by 31 October 2020.

Where HMRC decide that an employer has claimed a CJRS payment to which it was not entitled, HMRC can recover overpaid CJRS payments by making a tax assessment for the amounts to which HMRC consider that the employer was not entitled, and the employer can appeal against such a tax assessment in the usual way.

Where HMRC consider that an employer knew at the time that it claimed CJRS that it was not entitled to receive CJRS payments in respect of an employee, HMRC can also issue a FTN penalty against the employer for up to 100% of the overpaid CJRS payments.

We were provided with a hearing bundle of 850 pages and an authorities bundle of 1877 pages. We also had the benefit of separate skeleton arguments on behalf of both parties in respect of each appeal. Officer MacRae of HMRC provided two witness statements, gave oral evidence ‎at the hearing and was cross examined by Ms Simak.

HMRC and NI were directed to provide further submissions after the hearing on the public law issue referred to at paragraphs [‎69] onwards below. In compliance with these directions NI provided a four page submission on 23 January 2026 and HMRC provided a five page submission on 6 February 2026.

TNAL made claims for CJRS in respect of two employees covering the period from 23 March 2020 in the sum of £36,772.72 and those claims were duly paid.

HMRC opened a check into TNAL’s CJRS claims on 14 October 2020 which it concluded on 18 February 2021 and raised an assessment for overpaid CJRS in the sum of £19,981.47 for the accounting period ending 31 January 2021 (the Underlying Assessment).

The basis of the Underlying Assessment was that one of the employees for which CJRS had been claimed, Mr Arafat (the Employee) was not included on an RTI FPS received by HMRC by 19 March 2020 and therefore TNAL did not qualify for CJRS in respect of the Employee for the period up to 31 October 2020.

For the period from 1 November 2020 to 30 September 2021, HMRC accepted that the Employee had been included on an RTI FPS between 19 March 2020 and 31 October 2020 but they did not accept the quantum claimed for the Employee so the Underlying Assessment in respect of this period covered that overpayment.

TNAL appealed against the Underlying Assessment on 15 March 2021 and HMRC issued a Review Conclusion letter on 4 November 2021 in which it varied the Underlying Assessment from £19,981.47 to £15,373.47. TNAL lodged an appeal against the Underlying Assessment with the Tribunal on 26 November 2021.

HMRC withdrew their opposition to the appeal against the Underlying Assessment for the period from 1February 2021 on the basis that it fell outside the Appellant’s accounting period ending 31 January 2021 which was the subject of the Underlying Assessment, and should therefore have been separately assessed.

The appeal against the Underlying Assessment was determined by the FTT (Judge Anne Scott and Tribunal Member James Robertson) in its decision dated 2 June 2023 (Top Notch Accountants Limited v HMRC [2023] UKFTT 00473 (TC)) (the Assessment Decision).

The Assessment Decision held that:

The Assessment Decision varied the Assessment reducing it further to £14,673.47 and dismissed the appeal against the Underlying Assessment.

The Assessment Decision also made the following findings of fact:

TNAL applied to the First-tier Tribunal (FTT) for permission to appeal against the Assessment Decision. Permission was refused on 12 July 2023. TNAL then applied to the Upper Tribunal (UT) for permission to appeal which was refused by the UT on 23 August 2023. TNAL then applied for an oral consideration and the UT subsequently refused permission to appeal on 18 October 2023 following an oral consideration on 17 October 2023.

TNAL subsequently sought to challenge the decision again, which the FTT treated as a request for a review which it refused on 17 July 2025. TNAL then sought permission to appeal against that refusal but permission was refused by the FTT on 26 November 2025. We understand that TNAL has subsequently sought to submit a further appeal to the FTT which has not yet been dealt with.

Following HMRC’s withdrawal of their opposition to the Underlying Assessment in respect of the period from 1 February 2021 to 30 September 2021 as referred to in paragraph [‎18] above, HMRC issued a further assessment to TNAL in respect of the alleged overpayment of CJRS in that period (the 2024 Assessment). TNAL submitted an appeal to the tribunal against this assessment and that appeal was accepted by the tribunal under reference TC/2024/00032 (the 2024 Appeal).

HMRC accepted that TNAL was entitled to CJRS in respect of the Employee for this period but they did not accept that the reference salary used was correct. HMRC subsequently accepted the reference salary used by TNAL for the reasons explained more fully in paragraph [‎46] below, and withdrew their opposition to this appeal which was therefore allowed by the Tribunal on 9 October 2024.

The quantum of the PLN is dependent on the quantum of the FTN penalties. We will therefore determine the first appeal against the FTN penalty before turning to consider the second appeal against the PLN.

HMRC issued a FTN penalty assessment to TNAL on 19 September 2023 (the FTN Penalty). This was issued pursuant to Schedule 41 to the Finance Act as applied by paragraph 13 of Schedule 16 to the Finance Act 2020. References to Schedule 16 in this decision are to Schedule 16 of the Finance Act 2020.

TNAL submitted its appeal against the FTN Penalty to the FTT in time on 31 October 2024.

Paragraph 8 of Schedule 16 provides as follows:

Sub-paragraph 8(4) provides that in a case where the recipient of the CJRS payment was never entitled to the CJRS payment, the income tax becomes chargeable at the time that the CJRS payment is received.

Paragraph 13 of Schedule 16 reads as follows (underline added):

The relevant parts of paragraph 12 of Schedule 16 read as follows:

It follows that section 7 of TMA 1970 at the relevant time as modified by paragraph 12 of Schedule 16 for the purpose of overpayments of CJRS payments read as follows:

Paragraph 6 of Schedule 41 to FA 2008 as modified by sub-paragraph (2) of paragraph 13 of Schedule 16 reads as follows:

As the penalty in question relates to a domestic matter it is a category 1 penalty pursuant to paragraph 6A of Schedule 41 to the FA 2008 and pursuant to paragraph 13(3) of Schedule 16 a failure within paragraph 13 is to be treated as deliberate and concealed.

It follows from the above that where there is a liability to income tax under section 8 of TMA 1970 for a CJRS overpayment and the employer who was chargeable knew at the time that the income tax became chargeable that it was not entitled to the CJRS overpayment to which the income tax liability relates, then its failure to notify HMRC of the liability is treated as deliberate and concealed for the purpose of paragraph 6 of Schedule 41 to FA 2008.

In order for the FTN Penalty to be valid the burden of proof is on HMRC to show that TNAL knew at the time that the income tax became chargeable that it was not entitled to the CJRS payments that it received in the period March 2020 to October 2020 (the Knowledge Issue).

Both parties proposed to put forward abuse of process arguments so it was agreed that we would decide these abuse of process issues as a preliminary issue before hearing submissions from both parties on the remaining issues.

Mr Simpson submitted for HMRC that, although the Assessment Decision did not determine the Knowledge Issue, it did make findings of fact which are relevant to the Knowledge Issue and cannot now be challenged or reopened by TNAL, because to do so would be an abuse of process.

Mr Simpson referred us to the House of Lords decision in the case of Johnson v Gore Wood & Co [2002] 2 AC 1 at paragraph [32] where Lord Bingham stated that the correct approach was that formulated by Sir Robert Megarry V-C in Gleeson v Wippell [1977] 1 WLR 510 at 515 as follows:

Miss Simak did not counter HMRC’s submission that it would be an abuse of process to challenge the Assessment Decision or any findings of fact on which it is based, if the decision were final, but she submitted that:

TNAL assert that it is an abuse of process for HMRC to continue to pursue the FTN Penalty because by conceding the 2024 Appeal, it has implicitly accepted that it did receive an RTI FPS which included the Employee by the 19 March 2020.

The logic behind this submission is, Miss Simak asserts, that the assessment which was the subject of the 2024 Appeal concerned a dispute over the quantum of the reference salary. The salary amount for the Employee that TNAL included on its edited RTI for the March 2020 period was £2,400. HMRC had initially asserted that the reference salary for the February 2021 to September 2021 period should be based on the salary amount for the Employee that TNAL had included on its RTI for the subsequent periods which was £1,920 which is equal to 80% of £2,400 and what HMRC had paid to TNAL as CJRS payments. HMRC therefore raised an assessment for the difference.

Miss Simak took us to the Third Direction para 19.2 which provides that the reference salary is the amount included in the RTI submitted by 19 March 2020. 19.2 reads as follows:

It followed therefore in Miss Simak’s submission, that by accepting the reference salary as £2,400 HMRC must have accepted that the Employee and his salary of £2,400 was included on the RTI submitted by TNAL prior to 19 March 2020 and it would be an abuse of process for HMRC to pursue the FTN Penalty, which was predicated on TNAL not including the Employee in the RTI FPS submitted by 19 March 2020.

HMRC’s response to this submission is as follows:

On the alleged abuse of process by TNAL we agree with HMRC for the reasons relied on by Mr Simpson that it would be an abuse of process for TNAL to make any submissions that rely on a finding of fact that is contrary to those made in the Assessment Decision. To allow TNAL to litigate these facts a second time in this appeal would not be in HMRC’s interests or that of the public.

We do not accept Ms Simak’s submission that the Assessment Decision is not final. Appeals against tax assessments are governed by a statutory appeal process and when the UT refused to grant TNAL permission to appeal on 18 October 2023 following an oral consideration on 17 October 2023, that was the end of the appeal process relating to the Assessment Decision and it is therefore final. This is the case irrespective of any subsequent letters that TNAL sends to the FTT and the UT, purporting to appeal against the Assessment Decision.

It follows that TNAL cannot argue in this appeal that it believed that it had submitted an RTI to HMRC which included the Employee before 19 March 2020 because of the “RTI submission receipt” that it alleges it received from HMRC. This is because TNAL could only rely on these documents if they were unedited and credible and the Assessment Decision has already decided that these documents had been edited by TNAL to mislead HMRC and are not credible.

On the alleged abuse of process by HMRC we first note that the relevant clause in the Fifth Direction that replicates 19.2 in the Third Direction is 13.2 which provides:

The relevant reference day for the assessment which was the subject of the 2024 Appeal is defined in paragraph 11.8 of the Fifth Directive as 30 October 2020.

We accept Mr Simpson’s explanation as to why HMRC conceded the 2024 Appeal as set out above and that this was not because it accepted that the RTI, which included the Employee had been submitted to HMRC by 19 March 2020. It was merely because they accepted that RTIs including the Employee had been submitted on or before 30 October 2020 and that the RTI submitted to HMRC in April 2020 showed the salary paid to the Employee in March 2020 as being £2,400. This together with the Employee’s original employment contract with TNAL which corroborated that salary persuaded HMRC in light of the Borge Restaurant FTT decision that the reference salary was £2,400 and not the amount stated for the employee in the latest RTI before 30 October 2020.

It follows that it is not an abuse of process for HMRC to continue to pursue the FTN Penalty, notwithstanding that it conceded the 2024 Appeal.

We proceed then to consider the Knowledge Issue as described in paragraph [‎37] above. For HMRC Mr Simpson submitted that:

For TNAL Ms Simak submitted that NI maintains that he did not have the necessary knowledge because he did think that he had submitted the RTI including the Employee by the 19 March 2020.

We consider that there would have been no reason for NI to submit falsified documents on behalf of TNAL if he had not known that the RTI including the Employee needed to be submitted by 19 March 2020 and that he had not done this. TNAL has no documentary evidence to support its submission that it believed that it had submitted the relevant RTI on time, as the documents that it sought to rely on had already been found by the FTT in the Assessment Decision to have been falsified. Nor did NI give evidence at the hearing as to his knowledge.

We therefore find that for all the reasons submitted by Mr Simpson for HMRC, that on a balance of probabilities NI, and therefore TNAL, knew that it was not entitled to the CJRS payments for the period from March 2020 to October 2020 because it knew that it had not submitted the RTI including the Employee by 19 March 2020 and that this was a requirement for the CJRS entitlement.

TNAL had submitted in its skeleton argument that the following constituted special circumstances which would justify HMRC reducing the penalty pursuant to paragraph 14 of Schedule 41 to the Finance Act 2008:

Mr Simpson submitted for HMRC that as the question of special circumstances is only relevant where TNAL is liable to a penalty and as it can only be liable to a penalty if it knew that it was not entitled to the CJRS payments, the first three points above cannot be special circumstances for the purpose of the legislation. On the final point he had found no reference to the term in quotes in the Assessment Decision and in any event it did not constitute a special circumstance.

Ms Simak made no further submission on behalf of TNAL on the special circumstances points set out above.

We find that HMRC’s decision to deny any reduction for special circumstances is not flawed.

The PLN Assessment against NI was issued on 20 September 2023 pursuant to paragraph 22(1) of Schedule 41 to the FA 2008 as applied by paragraph 13 of Schedule 16 for the accounting period ending 31 January 2021.

The PLN Assessment makes NI personally liable for 100% of the FTN Penalty that covers the First, Second and Third FTN Penalties.

The PLN Assessment is dependent on the FTN Penalty, so if the Tribunal cancels the Second and Third FTN Penalty the PLN Assessment must also be reduced accordingly.

NI submitted his appeal against the PLN to the Tribunal in time on 31 October 2024.

Paragraph 22 of Schedule 41 to the FA 2008 provides as follows:

This legislation allows HMRC to issue a PLN against an officer of the company that has been found liable for a FTN penalty where the failure was attributable to the officer.

NI has at all material times been the sole director of TNAL and it is accepted by TNAL that all of the relevant acts and failures of TNAL were attributable to NI.

The basis of Ms Simak’s submissions at the hearing against the PLN were therefore limited to a public law issue as follows:

HMRC did not dispute that the CJRS payments had been made to the Employee and Mr Simpson quite rightly did not submit that NI had in fact personally benefited from the failure to notify.

Mr Simpson’s primary submission was that the FTT does not have a general jurisdiction to decide public law issues and that based on the decided case law on this point the FTT only has jurisdiction to decide public law issues where the legislation specifically confers that jurisdiction on the FTT. That is not the case here and Ms Simak has not identified a route for the Tribunal to have a specific public law jurisdiction.

In her written submissions after the hearing Ms Simak conceded that:

We find that NI was the sole director of TNAL and that he was personally responsible for all of the acts and omissions of TNAL in respect of the CJRS claims it made. It follows that the statutory requirement is met for the PLN Assessment to be issued to NI.

We also find that we do not have jurisdiction to decide the public law issue raised by NI regarding the HMRC guidance referred to.

For all the reasons set out above:

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.