HMRC discloses employer explanations for not paying legal minimum wage

‘She only makes the tea’ and ‘my employees are on standby’ are just some of the strange excuses used by businesses who have paid their workers under the National Minimum Wage, the UK tax office has revealed.

Every employed worker in Great Britain is legally entitled to the National Minimum Wage, but many employers tried cheating the pay system during the last financial year, according to a new Government report.

HM Revenue and Customs (HMRC) has released the most shameful excuses that employers have used for failing to pay their employees correctly, including ‘my workers like to think as themselves as being self-employed’ and ‘young workers have to prove their worth in the first three months’.

One company claimed their employee is ‘still learning so they are not entitled to minimum wage’, while another thought ‘the National Minimum Wage does not apply to their business’.

Other outrageous excuses for not paying employees the legal minimum wage include: ‘She only sweeps the floors’, ‘they weren’t a good worker’ and ‘I thought it was okay to pay young workers less if they are not British’.

During the last tax year, HMRC assisted around 155,000 ‘short-changed’ employees in the UK to retrieve more than £16 million which was owed to them. In addition, they also distributed more than £14 million in fines.

The Director of Individuals and Small Business Compliance, HMRC, Steve Timewell said: “The majority of UK employers pay their workers at least the National Minimum Wage, but this list shows some of the excuses provided to our enforcement officers by less scrupulous businesses.

“Being underpaid is no joke for workers, so we always apply the law and take action. Workers cannot be asked or told to sign away their rights.”

He added: “We are making sure that workers are being paid what they are entitled to and, as the economy reopens, reminding employers of the rules and the help that is available to them.

The national minimum wage differs for each individual as it is dependent on an employer’s age and experience, with under 23s receiving a lower rate than those older than 23.

The current hourly rates are:

  • £8.91 – Age 23 or over
  • £8.36 – Age 21 to 22
  • £6.56 – Age 18 to 20
  • £4.62 – Age under 18
  • £4.30 – Apprentice

As part of the government’s plan to bounce back from the pandemic, HMRC is encouraging employees to regularly monitor their pay, cash deductions and any unpaid working time.

To find out more about the National Minimum Wage, click here.

Electric vehicles for company car drivers

As most drivers of a company car will be aware, if you have any private use of the vehicle this will result in a significant Income Tax charge. The benefit charge is the way that HMRC levy tax on this benefit in kind; and the higher the CO2 footprint of your company car, the higher the Income Tax charge.

Which is why many company car drivers are now looking at electric vehicles – either plug-ins or self-charging hybrids – as a tax efficient alternative.

For example, if you presently drive a gas-guzzling petrol driven car with a CO2 rating of 145g/km you could drastically reduce your benefit in kind tax charge by switching to a hybrid or fully electric car with a CO2 rating as low as 0g/km. There would still be a tax charge, even at 0g/km, but it would be based on a minimum 1% of the list price of the car when new, rather than 33% if rated at 145g/km.

Company car drivers whose private fuel is paid for by their employer will pay an additional Income Tax charge based on the Car Fuel Benefit charge. This charge is calculated by applying the above percentage rate (33% in our example above) to a fixed figure, £24,600 for 2021-22. Accordingly, the Car Fuel Benefit charge added to the driver’s taxable income would be £8,118.

Interestingly, since 6 April 2018, there is no taxable car fuel benefit where electricity is provided for an electric car. Legislation was included in the Finance Act 2019 with retrospective effect where the recharge facilities are made available to all employees at the workplace.

If an employee recharges a company vehicle at home and is then reimbursed for the cost of the electricity used, this may be challenged as earnings. However, the employee could then make a claim for the electric cost using the advisory rates. Currently this is 4p per mile for fully electric cars.

A final point, employers would also benefit from a shift to an all-electric company car fleet. They are obliged to pay a 13.8% National Insurance charge on the total value of benefits provided (car and car fuel benefits); in which case converting to electric would be an additional bonus.

Can you claim the marriage allowance?

In a recent news story published on the GOV.UK website, HMRC confirmed that nearly 1.8 million married couples and those in civil partnerships are claiming the Marriage Allowance to save up to £252 a year in Income Tax.

The allowance enables married couples or those in civil partnerships to share their personal tax allowances if one partner earns an income under their Personal Allowance threshold of £12,570 and the other is a basic rate taxpayer.

They can transfer 10% of their tax-free allowance to their partner, which is £1,260 in the 2021-22 tax year. It means couples can reduce the tax they pay by up to £252 a year. Couples can also backdate their claims for any of the four previous tax years, which could be worth up to £1,220.

If you are eligible, and still not making a claim, you can complete an application online at https://www.gov.uk/apply-marriage-allowance.

Furlough figures continue to fall

Almost three million people have moved off the furlough scheme since March as the economy began to bounce back and businesses reopened, according to new statistics.

This is unsurprising as employers are now expected to cover 20% of any hours not worked with government providing 60%.

It will be sobering to see how the final closing of the furlough scheme on 30 September will affect unemployment rates.

Readers who are still undecided how to respond to these changes will need to make possibly agonising decisions in the coming month.

We can help. Please call so we can help you consider your options.

Tax collection options

If you do not pay your tax bill on time and cannot make an alternative arrangement to pay, HMRC can take ‘enforcement action’ to recover any tax you owe.

You can usually avoid enforcement action by contacting HMRC as soon as you know you have missed a tax payment or cannot pay on time.

They may agree to let you pay what you owe in instalments, or give you more time to pay.

Otherwise, there are a number of enforcement actions HMRC can take to get the tax you owe. They can:

  • collect what you owe through your earnings or pension
  • ask debt collection agencies to collect the money
  • take things you own and sell them (if you live in England, Wales or Northern Ireland)
  • take money directly from your bank account or building society (if you live in England, Wales or Northern Ireland)
  • take you to court
  • make you bankrupt
  • close down your business

If you do not pay your tax on time, you’ll probably have to pay interest on the outstanding amount. You may also have to pay a penalty or surcharge.

Tax Diary September/October 2021

1 September 2021 – Due date for Corporation Tax due for the year ended 30 November 2020.

19 September 2021 – PAYE and NIC deductions due for month ended 5 September 2021. (If you pay your tax electronically the due date is 22 September 2021)

19 September 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2021.

19 September 2021 – CIS tax deducted for the month ended 5 September 2021 is payable by today.

1 October 2021 – Due date for Corporation Tax due for the year ended 31 December 2020.

19 October 2021 – PAYE and NIC deductions due for month ended 5 October 2021. (If you pay your tax electronically the due date is 22 October 2021.)

19 October 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2021.

19 October 2021 – CIS tax deducted for the month ended 5 October 2021 is payable by today.

31 October 2021 – Latest date you can file a paper version of your 2021 self-assessment tax return.

More UK businesses join vaccine uptake drive

In a recent press release the government announced that more of the country’s leading businesses from a variety of industries have pledged their support for the UK’s world-leading COVID-19 vaccination programme by offering incentives to vaccinated customers.

Asda, lastminute.com, National Express, FREE NOW taxis and Better leisure centres will be offering discounts to people who get a COVID-19 vaccine, joining the national effort to protect the country as it continues its cautious return to normality.

The companies will be joining Uber, Bolt and Deliveroo, which committed last month to backing the vaccination programme by providing exclusive offers to those who have received a jab.

The new businesses and rewards will include:

  • Asda – will offer £10 vouchers for their clothing brand George to 18- to 30-year-olds who spend over £20. These will be offered at the vaccine pop-up clinics located in Old Kent Road in London, Watford & Birmingham;
  • lastminute.com – will offer over-18s £30 gift cards towards holidays abroad to all young people getting vaccinated through their website;
  • Better leisure centres – will offer over 16s a £10 voucher to use on any Better membership and a free three-day pass at any of their 235 leisure facilities across the UK;
  • FREE NOW – will provide up to £1 million in free taxi rides for over-18s attending their vaccine appointment each way from today [Sunday 15 August] until the end of September; and
  • National Express Buses (Midlands) – will offer 1,000 people 5-day unlimited travel saver tickets which can be used within 90 days. Tickets can be claimed by sharing vaccine booking references in the company’s app.

Deliveroo has also revealed further details of their support, which will include thousands of £5 vouchers to those who get the vaccine, distributed in the coming weeks. Bolt will be offering £10 vouchers for 10,000 rides from next week in Birmingham and Leicester, and Uber will be announcing further details shortly around their drive to help students get vaccinated ahead of term time.

Fewest number of people on furlough since the scheme began

Furlough numbers have recently fallen to a record-low since the beginning of the pandemic, government data has confirmed.

When businesses started reopening earlier this year, furlough numbers plunged by three million and have gradually declined ever since.

  1. records show that at the end of June 2021, nearly two million British workers were on furlough, dropping by nine million from the peak of the pandemic in May 2020.

Since June, it is also thought that furlough numbers have plummeted even further to around 1.5 million people, an ONS Business Insights and Conditions Survey reports.

Throughout the pandemic, 28% of employers had staff on the Coronavirus Job Retention Scheme.

Recruitment worker, Jane told HR magazine that being on furlough was challenging when more people were going back to work and her job was left hanging in the balance.

She said: “It felt like everyone around me was going back to normal.

“However, I've been grateful for the time to take a step back and look at what I like about my role, what I don't like, and kind of developing from there.”

  1. recent visits to Scotland, the Chancellor of the Exchequer, Rishi Sunak MP recognised the economic power of the union and applauded the Government’s Plan for Jobs, which will continue to help people and businesses once the furlough scheme ends.

He said: “It’s fantastic to see businesses across the UK open, employees returning to work and the numbers of furloughed jobs falling to their lowest levels since the scheme began.

“I’m proud our Plan for Jobs is working, and our support will continue in the months ahead.”

For the first time since furlough began, young people are no longer the biggest demographic signed onto the Coronavirus Job Retention Scheme.

The reopening of hospitality and retail led to more than a million people leaving the scheme, with younger people making up the majority of the workforce in these sectors.

Since April 2021, nearly 600,000 under 25s have come off furlough, double the amount of older people who have left the scheme.

Furlough has been prolonged several times, but it will finally come to an end in September.

Employers currently have to pay 20% of furlough payments until the scheme officially concludes.

According to The Office for Budget Responsibility, the entire furlough scheme will have cost £66 billion by the time it finishes.

To help people moving forward, the Government’s Plan for Jobs project will continue to assist people back into work as the economy starts to bounce back.

Companies closed after abusing COVID loan support

In what is likely to be the tip of a significant ice-berg, two companies who fraudulently applied for thousands of pounds in grants and loans have been wound up in the courts.

According to a recent government press release the two separate companies submitted false documents to at least 41 local authorities and the Government’s Bounce Back Loan scheme to secure £230,000 worth of grants; grants that were offered to support businesses across the UK during the pandemic.

The Insolvency Service proved that neither company ever traded.

Investigators uncovered that one company had registered their offices in Whitchurch, Shropshire, but had provided false lease documents and utility bills to 14 different local authorities to fraudulently claim they traded out of premises in their respective areas.

The companies fraudulently secured business grants from local authorities, as well as Bounce Back Loans. Investigators uncovered that the premises that the companies falsely claimed to operate from were either unoccupied, up for rent or occupied by a different company.

Small Business Minister Paul Scully said:

“This decisive enforcement action shows that we will not tolerate shameless attempts to defraud the taxpayer and falsely claim public money intended to help businesses through the pandemic.

“We are cracking down on Covid fraud across the board and those who have tried to take support they were not entitled to, which was given in response to the worst crisis of our lifetimes, can expect to face heavy consequences.

“The lengths that fraudsters went to as they tried to falsely claim grants surprised even our most experienced staff, but by using national counter fraud networks, concerns could be raised quickly and trends and patterns were shared with other authorities.

“We are very proud of the way our teams supported so many businesses in extraordinary circumstances, and we are also pleased that they foiled attempts by a small minority to exploit the misery that Covid-19 has brought to so many.”

Could you benefit from additional tax relief?

Couples may be eligible to reduce their Income Tax by up to £252 a year by sharing their Personal Allowances.

HMRC has announced that nearly 1.8 million married couples and those in civil partnership are using Marriage Allowance to save up to £252 a year in Income Tax.

Marriage Allowance allows married couples, or those in civil partnerships, to share their Personal Tax Allowances if one partner earns below £12,570 a year, and the other is a basic rate taxpayer.

Couples can transfer 10% of their tax-free allowance to their partner (£1,260 for 2021 – 2022 tax year), significantly reducing the amount of annual tax they pay. They can also backdate their claims for the past four tax years, potentially receiving up to £1,220.

Angela MacDonald, HMRC’s Deputy Chief Executive and Second Permanent Secretary said: “Marriage Allowance lets eligible couples share their Personal Allowances and reduce their tax by up to £252 a year. Nearly 1.8 million couples are already using the service – it is free, quick and easy to apply.”

If a married couple have experienced a change in their circumstances, it may mean they are now eligible for Marriage Allowance. This includes:

  • A recent marriage or civil partnership
  • One partner has retired and the other remains working
  • A change in employment due to COVID-19
  • A reduction in working hours which means their earnings fall below their Personal Allowance
  • Unpaid leave or a career break
  • One partner is studying or in education and not earning above their Personal Allowance

If a spouse or civil partner has died since April 5th 2017, their partner can still claim by contacting the Income Tax helpline.

While Marriage Allowance claims are usually automatically renewed each year, couples should notify HMRC if their circumstances change.