News

06 Dec 2019

Rural businesses remain in the spotlight under HMRC's investigations

HMRC’s ongoing investigations into National Minimum Wage discrepancies continue unabated and the rural sector remains a target under scrutiny.

This is according to rural finance experts Saffery Champness, who say investigations are target driven with officials seeking any anomalies, whether arrears or errors.

Particularly, they are focusing on numbers of workers who have been underpaid.

Angela Ferguson, of Saffery Champness, said: “HMRC has a non-negotiable 200 percent penalty on all arrears found going back six years, for current and former workers, reduced to 100 percent if paid with 14 days.

“Moreover, when arrears total more than just £100 then HMRC policy is to name and shame the employer too.”

The firm has listed areas that farms, estates, equestrian and other land-based businesses should take note:

Deductions from pay

These might take the form of deductions for goods, stabling, food or salary sacrifice arrangements for example, and the NMW must be paid after taking such deductions into account.

The practice of using payroll to take these deductions has in some instances inadvertently caused employers to breach NMW rates.

Ideally a separate payment method outside of payroll will not cause an NMW breach, and therefore structuring payments this way is less open to error.

Provision of benefits such as accommodation

Where accommodation is rent free then an amount, the ‘accommodation offset’, is added to pay for NMW purposes, currently at the rate of £7.55/day.

Where employees are charged rent however then any excess daily charges above the NMW day rate will reduce their pay for NMW purposes.

Where rent charged is below the offset rate unfortunately there is no credit given for the difference between the charge and the offset rate.

Provision of uniform or equipment

Where these are not provided by the employer, an equivalent cost can be applied as a deduction for NMW purposes to pay to represent the cost the employee has had to incur.

This can apply to clothing that the employer may request staff to wear, or items of equipment or tools of trade required to carry out their work.

Volunteers

In some cases, HMRC has challenged whether a volunteer is actually a volunteer or a worker for NMW purposes.

Care is needed with the wording of any agreements including any promise of a contract or paid work in the future.

Volunteers can receive amounts to cover any expenses incurred, but any flat rate payments should be avoided, as this would automatically deem them to be a worker and entitled to the NMW.