Glo-Ball Group Ltd v Revenue and Customs Commissioners [2023] UKFTT 435 (TC) was an interesting decision at the 1st Tier Tribunal in respect of the Coronavirus Job Retention Scheme and what constitutes ‘working’ for the purposes of furlough payments.

The appeal related to payments made under the Coronavirus Job Retention Scheme. Between 23 April 2020 and 18 December 2020, the appellant claimed and was paid £9,486.38 by way of support payments under the Scheme. Clearly, the payments could only be made in respect of furloughed employees. A furloughed employee is one who has ceased all work for the employer for 21 calendar days or more. It was accepted that one of the directors / employees had posted on the company Facebook account during the relevant periods.

The Tribunal had to decide - whether those posts (or any of them) could be described as ‘work’ for the purposes of the Scheme. If so, the appeal would fail (in whole or in part). If not, the appeal would succeed (in whole or in part). The law was quite straightforward. An employee is a furloughed employee if:

(a) the employee has been instructed by the employer to cease all work in relation to their

employment,

(b) the period for which the employee has ceased (or will have ceased) all work for the

employer is 21 calendar days or more, and

(c) the instruction is given by reason of circumstances arising as a result of coronavirus or

coronavirus disease.

By way of background, the Scheme was established to provide support payments to employers on a claim made in relation to the costs of employment in respect of furloughed employees arising from the health, social and economic emergency in the United Kingdom resulting from coronavirus. The Scheme allowed a qualifying employer to apply for reimbursement of the expenditure incurred by the employer in respect of the employees entitled to be furloughed under the Scheme.

The company was in the business of running parties, discos and community events for children. The events involved hiring a venue and advertising on social media to a database of parents. The advert allowed the online booking of a place at an event. The evidence was that the company spent around 15 hours per week dedicating efforts to online marketing. For obvious reasons, lockdown saw a very dramatic decrease in the social media output. The company offered the employee furlough, but said “..you will not be able to undertake any work for the company during this leave.”

The appellant claimed payments under the Scheme for the period 23 March 2020 to 30 September 2021. During the period between 1 March 2020 and 30 June 2020, the so-called ‘classic’ period during which no furloughed employees were allowed to work, the appellant's claims were based on 80% of the 2 x directors’ monthly salary. During this period the claim was for approximately £3,785. This was claimed for four periods - March, April, May and June 2020. Flexible furlough was introduced with effect from 1 July 2020 until 31 October 2020. This allowed employees in respect of whom a claim had been, or could validly have been, made during the classic period to return to work on a flexible basis. However, if an employee had not been eligible for payment during the classic period, they were not eligible employees for payments under the flexible furlough scheme. The appellant made further claims for payment under the Scheme for July, August, September, October, November and December 2020. The total of those claims amounted to approximately £5,700.

The reviewing officer regarded the Facebook posts as work for the purposes of the scheme and this had two consequences. Firstly, M was not eligible to be included in the claim for the classic period. Secondly, because of this ineligibility, M was not an eligible employee for the purposes of claims made under the flexible furlough regime. As a result, M could only be treated as an eligible employee on and from 1 November 2020. M organised classes between 23 November 2020 and 11 December 2020, yet the appellant had claimed for classic furlough payments for these periods in respect of M. The appellant should have claimed payments under the flexible furlough scheme. The payments were adjusted accordingly. The claims in respect of the other director S were accepted. The directors disagreed with the assessment and appealed to the Tribunal (after an internal HMRC review ratified the first decision). They argued that the small number of social media posts did not constitute work. ADR was unsuccessful and the appeal proceeded.

There were around 35 posts to social media between March 2020 and January 2021. They Tribunal observed that the posts fell into several categories –

• general observations about difficulties during lockdown,
• adverts for a specific event,
• requests for likes,
• M updating clients about her qualifications,
• Informational posts about other resources,
• posts about an award nomination,
• posts about plans for the business during and beyond lockdown.

The Tribunal’s first task was to establish on the balance of probabilities whether the assessments were ‘in time’. The burden rests with HMRC in this respect and the Tribunal agreed that the assessments had been made in time. Once this was established, the burden shifted to the appellant to show (to the same standard) that it had been overcharged as a result of the assessments. The appellant’s submissions were based around fairness, complexity of the rules (together with lack of guidance) and HMRC’s behaviour. The Tribunal could not make a determination on any of those topics. To do so would have been outside the scope of their powers. The Tribunal was confined to make a determination on whether the social media posts amounted to work. The appellant argued that the company had not received income from the activity during lockdown and HMRC’s assessment was disproportionate, given the comparatively low number of posts during the relevant period. No events were run during the period and hardship would arise if the appeal were to fail. They argued that the scheme was designed to help companies just like theirs.

HMRC argued that M was not a furloughed employee and should not have been permitted to undertake work, which included ‘…providing services, generating revenue and social media management’. It was also argued that M had not ceased work in relation to the employment for 21 days or more because of the social media posts, and thus the costs of employment claimed in respect of M were not qualifying costs. The work was not subject to any statutory exceptions and its meaning – HMRC argued – should be construed in the context of section 4 Income Tax (Earnings and Pensions Act) 2003 as employment. Guidance in force on 22 April 2020 dealt with furloughed directors and indicated that they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provide services to on behalf of their company.

The Tribunal agreed that the scheme was designed to help businesses like the appellants’ enterprise, but only if the qualifying criteria were met. During the classic period, the cessation of work was to be absolute in return for the payment. The focus of the discussion was whether M had ceased all work for the appellant for 21 calendar days or more. The Tribunal felt that ‘all work’ has both quantitative and qualitative elements. It took the view that

“…even a single piece of work undertaken by an employee during the relevant period means that that employee cannot be a furloughed employee because he or she has not ceased ‘all’ work”. In other words, it was all or nothing. Focus then turned to whether the social media posts amounted to work for the purposes of paragraph 6 of the Coronavirus Direction. There being no definition of ‘work’ in the legislation, HMRC urged the Tribunal to regard work as “…any employment under a contract of service or activity under an employment for their employer”. The relevant HMRC guidance states that employees should not provide services or generate income for the business.

The Tribunal came to this view:

“…any activity undertaken by an employee with the view to either directly or indirectly generating income for an employer, or to enhance the employer's goodwill (brand value) or reputation, comprises work. It does not matter whether the activity actually generates income, what is important is that the activity is intended to generate income. This can be direct or indirect. Marketing activities which may not directly generate income (and judging the commercial worth of marketing activities is the most imprecise of sciences) comprise work. Indeed, many organisations of modest size employ either in-house or outsourced, the services of marketing experts”.

The Tribunal could not introduce some proportionality to the legislation, even though the social media activity had dramatically decreased. The vast majority of the posts were determined to be work, in that they maintained brand awareness and increased the good will of the company. The Tribunal did not feel able to distinguish between work which might have an immediate impact on revenue generation and activities which might have an impact on the ability of a business to generate revenues in the future. Both activities comprise work. The Tribunal recognised the tension between maintaining a company’s presence in the market and complying with the scheme. However, many posts focusing on brand awareness etc. were seen as marketing, promoting and positioning the company; in the same way a company would work outside a lockdown. The Tribunal therefore decided that M had worked during the relevant period and since M did not qualify for the payments during the classic period, M could not qualify for payments during the flexible period. The appeal was dismissed.

The decision is an example of how the rules are strictly applied. Tribunals will not adjust the legislation, even where they have sympathy with those who must have suffered hardship during lockdown. Businesses must be mindful of how simply maintaining a presence in a suspended market can be construed as work. Advice should be sought as to what may or may not constitute work before an appeal is contemplated; ideally during the investigation period or perhaps for ADR.