By Brian Rudkin, employment tax partner, Armstrong Watson
Employers across North of England remain firmly in HMRC’s sight in respect of compliance with National Minimum Wage (NMW) regulations.
Whilst HMRC’s NMW compliance team has been busy over the last couple of years with sector-specific and geographical campaigns, we are now starting to see the Government’s recent investment in this area really coming to fruition with many more employers being selected for a formal NMW audit in recent months.
A number of businesses in Cumbria have already been selected over the last year or so and this has risen sharply in recent weeks, with HMRC being open that there is more to come. The focus appears to be on a wide range and size of businesses with no employer or sector being immune from being scrutinised.
Avoid steep penalties for NMW breaches It is anticipated that HMRC’s increased NMW compliance activity will generate significant extra revenues for the Exchequer by way of strict penalty charges applied to non-compliant businesses of 200% of any wages underpaid.
To be clear, HMRC isn’t necessarily targeting employers who it believes are deliberately paying below NMW rates.
HMRC recognises that many normally compliant businesses find it difficult to understand and apply the complex NMW rules, and technical breaches of the law are commonly found when undertaking a formal compliance check, for example in areas such as working time, pay deductions and age-related rates. Certain non-employees such as contractors and consultants can also be subject to NMW rules and this is an area of interest for HMRC when reviewing a business’ records.
Increasingly, HMRC is finding breaches of the law in respect of employees with higher than average salaries and so this is not just an issue reserved for the lowest paid workers in an organisation.
It is important to ensure that you fully understand the NMW risks and compliance gaps in your business before HMRC opens a formal audit, to provide an opportunity to self-correct any technical breaches before it is too late. Self-correcting mistakes in line with HMRC requirements can avoid financial penalties being applied and also being named and shamed in the press which is a significant and important incentive for any business.
