Conducting your trade through the medium of a limited company can bring tax and other benefits. However, as a case concerning the clawback of COVID-19 support grants paid to a fitness coach showed, it can also have disadvantages, not all of which can be foreseen.

The coach for some years worked as a self-employed sole trader. However, prior to the pandemic, he set up his own company through which he thereafter provided his services. As lockdowns took hold, he successfully applied for grants totalling £4,549 under the Self-Employment Income Support Scheme. HM Revenue and Customs subsequently demanded repayment of the entire sum.

Challenging the demand before the First-tier Tribunal (FTT), the coach said that he at all times reasonably considered himself eligible for the grants. Eligibility criteria, he asserted, were not clearly displayed on the government's website when he applied for them. He contended that it was for the government to check his eligibility and that, even after establishing his company, he remained an individual engaged in exactly the same trade as he had been previously.

Dismissing his appeal, however, the FTT noted that the clue was in the name of the scheme. It was only available to self-employed people. On setting up the company and becoming its director, he ceased to be a sole trader and became the company's employee. He and the company were entirely separate and distinct legal persons and the simple fact was that he was not self-employed when he applied for the grants and was not, and never had been, eligible for them.