A recent decision at the First Tier Tribunal has held that social media postings made by a director during a period of furlough counted as work, meaning that the conditions for furlough were not met. The company now faces repaying claims amounting to around £9,500, covering a period from March to November 2020.

The case concerns a small company run by husband and wife team Mr and Mrs Dowler. The company provides classes and group activities for parents with babies or small children led by Mrs Dowler, with much of its business generated through significant social media work. Prior to lockdown, the company ran two classes a day, five days a week and made 20-30 social media posts a day. Following the March 2020 lockdown, the business was prevented from operating. When lockdown lifted, it was only able to restart with a reduced number of classes. Accordingly, both directors were furloughed and claims were made for support from the Coronavirus Job Retention Scheme (CJRS).

While the claims for Mr Dowler for 2020 were accepted, Mrs Dowler continued to post updates to the company social media pages during the period from March to December 2020, although much less frequently than she had before. In HMRC’s view, her social media activity counted as work and caused her to fail the qualifying conditions for a furloughed employee. By the time she did meet the furlough conditions on 1 November 2020, following a change to the CJRS rules, she was then running some classes.

It’s worth a quick recap of the furlough rules at this point. During the life of CJRS, there were three phases - what the judge called ‘classic furlough’ from March to June 2020, ‘flexible furlough’ from July to October 2020 and then ‘extended furlough’, which ran from 1 November 2020 until the scheme ceased in September 2021.

To qualify as a furloughed employee in the classic phase, the individual had to be told to cease work as a result of coronavirus and then actually cease working for 21 calendar days or more. From July 2020 onwards, under the flexible furlough rules, an employee could do some work on normal rates of pay and be furloughed for the remainder of their usual working time. Crucially though, to be furloughed under the flexible scheme you first needed to have been successfully furloughed under the classic scheme. In HMRC’s view, Mrs Dowler’s 19 social media postings during March to June meant she never met the requirement of stopping work for 21 consecutive days, and therefore couldn’t qualify for classic furlough. Having failed to meet those conditions she then also failed the conditions for flexible furlough.

Guidance on directors and furlough was first provided in early April 2020. It allowed a furloughed director only to carry out particular duties to fulfil statutory obligations such as filing accounts or annual returns. Furloughed directors were not permitted do anything more than would be reasonably necessary for that purpose and they weren’t allowed to do work which generated a commercial revenue or provided services to their company.

Although the postings that Mrs Dowler made did not lead directly to income – they covered for example issues such as lockdown challenges, requests for likes, training updates and information, they also included an element of adverting, such as promoting an online event, telling followers about an award nomination and updating customers on plans for post lockdown reopening. Therefore, even though her social media work had been dramatically scaled back, in the Court’s view this did still count as work as marketing activities which were intended to maintain the brand’s reputation and generate future income. Since the requirement in classic furlough was an absolute ban on any work, the claim under both versions of the scheme failed.

This case has taken a long time to resolve and clearly placed a great strain on the directors, who felt strongly that the CJRS scheme was designed to support businesses like theirs. They have been through an appeal against the assessments in September 2021, an internal review by HMRC, an attempt at Alternative Dispute Resolution and written to two MPs and the Treasury. While the Tribunal judge was sympathetic to the financial hardship resulting from this decision - and hinted that HMRC should remember proportionality when considering any possible penalties - the Court could only rule on the factual matters in front of them and not on the fairness of the legislation.

What the case highlights is just how carefully HMRC will look at the activities which have been carried out during the period of any CJRS claims. While HMRC will be winding down their specialist Covid compliance teams by the end of September this year, they will be continuing to look at CJRS as part of general compliance work. Employers should consider just how strictly they enforced the ‘no work’ rule in the light of this ruling, especially in the early months of the CJRS.

This article reflects the position at the date of publication (17 July 2023). If you are reading this at a later date you are advised to check that that position has not changed in the time since.  

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