‘Fragile’ firm loses Revenue battle over €210,000 from covid wage support scheme

Commissioner Simon Noone upheld the Revenue assessment as the company had failed to demonstrate that its business had experienced or was expected to experience a 30% drop in revenues or customer orders

The managing director stated that, at the onset of the pandemic, the company had 30 to 35 employees. He said that the company was forced to commence a new business model due to covid. Picture:iStock

A ‘fragile’ firm still recovering from the pandemic, which “needed help not punishment”, has lost its battle with the Revenue Commissioners concerning €211,453 received in the Employment Wage Subsidy Scheme (EWSS).

This follows the Tax Appeals Commission (Tac) ordering the company to repay €211,453 it received in scheme payments during the pandemic.

In two separate rulings, the commission has ordered two companies to repay a total of €559,949 in scheme payments to Revenue.

In relation to the appeal against the 2021 Revenue Employment Wage Subsidy Scheme assessment for €211,453 for February to April 2021, commissioner Simon Noone has upheld the Revenue assessment as the company had failed to demonstrate that its business had experienced or was expected to experience a 30% drop in revenues or customer orders.

Mr Noone determined that the appellant firm saw an increase in turnover between 2019 and 2021.

He stated that it did not challenge Revenue’s calculations that its turnover increased from €2.19m in 2019 to €3.07m in 2021, which was an increase of 50%.

Mr Noone stated that the appellant had not retained contemporaneous documentation to demonstrate its eligibility to participate in the scheme, and did not perform any monthly rolling reviews for the months of February to June 2021.

Turnover

Mr Noone stated that the company’s corporation tax return for the year ended February 28, 2020, showed turnover of €2.44m, and its turnover for 2021 rising to €2.1m, with revenues for the year to the end of February 2022 rising further to €3.5m.

Initially, Revenue issued scheme assessments to the company in March 2023 for the months September 2020 to July 2021. However, following an internal review, the assessments for September 2020 to January 2021 inclusive were vacated.

The managing director for the company told the commission hearing that when lockdown was introduced, they debated laying off all their staff, but the scheme payments allowed the company to retain all of its staff.

He stated that without the scheme, the company would not have survived.

The managing director stated that, at the onset of the pandemic, the company had 30 to 35 employees. It currently had 78 full-time employees with “subbies and contractors” bringing it to about 120. He said that the company was forced to commence a new business model due to covid.

The company pointed out that while overall turnover for 2021 reduced by only 16% compared with 2019, the firm’s costs increased substantially — with the result that it recorded a net loss in its annual accounts to February 2022. The firm’s representative stated that the firm was still recovering from the pandemic and was in a fragile state and it needed help, not punishment.

The representative told the commission hearing that the company would have been in a better position if it had not joined the scheme at all, than if it was faced with having to repay subsidies.

The hearing was told that the firm joined the scheme in good faith, and the commission’s decision would be very serious for the company.

Attempt 'to manipulate'

Revenue told the hearing that the company informed it in 2021 that it expected its revenues to decease by 39.9%.

In the second unrelated Employment Wage Subsidy Scheme case, Revenue has ordered another company to repay €348,496 in scheme payments. Mr Noone noted that in the case, the company submitted revised revenue figures in 2023 to Revenue.

The appellant had previously claimed that its turnover for 2019 was €5.83m, but now stated that it was €7.38m.

Mr Noone stated that, regrettably, he concluded that “the inflation of the 2019 turnover was an attempt by the appellant to manipulate its turnover figures in order to try to prove its eligibility for EWSS”.

He said: “During cross-examination, the appellant’s accountant ultimately did not dispute counsel’s contention that the appellant misrepresented its figures.”

Revenue stated that the appellant had failed to demonstrate to its satisfaction that its business experienced or expected to experience a 30% reduction in turnover or customer orders during the claims periods and that the appellant had failed to prepare rolling reviews contemporaneously.

Revenue stated that the most reliable evidence that it had to go on was the appellant’s corporation tax returns, which showed that the dip in turnover as between the year ending February 2020 compared to 2021 was 20%  — well below the threshold on an annual basis.

Revenue stated that the figures subsequently provided to it had been manipulated in an effort to satisfy the 30% test.