Job Retention Scheme: The National Minimum Wage Dillema
Have you claimed for a Job Retention Scheme Grant and have employees being paid the National Minimum Wage?
Well, there seems to be a lot of confusion about whether your claim from April should be at the old NMW rate or the new one... And most of this confusion seems to be coming from HMRC.
Have you over claimed?
Last week one of my clients received a rather cryptic letter from HMRC stating;
“Our records show that you may need to pay some or all of the grant you have received”
But without any reasoning as to why or what mistake had been made in the claim.
This sent my client into a panic, calling me frantically trying to find out what they may have done wrong.
After speaking directly to HMRC, they are told that it is likely that they received the warning because of the increase to the National Minimum Wage that increased in April. The representative from HMRC informed my client that they should have made their claim based on the old NMW rate and had therefore inadvertently over claimed.
Surely that’s not right?
If the National Minimum Wage is set by the Government and employees must be paid at the rate they have published, why are employers unable to claim that full amount?
No Clear Guidance
I’ve been doing a little digging and there seems to be no clear guidance on this, with HMRC only stating:
”Individuals are entitled to the National Living Wage, National Minimum Wage or Apprentices Minimum Wage for the hours they are working or treated as working under minimum wage rules.”
It further states
“furloughed workers who are not working can be paid the lower of 80%”.
It does NOT say if the claim is to be at the old National Minimum Wage rate or the new one.
It seems the confusion stems from HMRC telling employers to base their claims on what employees would have been paid in March or an average of the previous year. But unfortunately what they seem to have failed to realise is that this doesn't take into account the increases in the minimum wage from the 1st April 2020.
Earlier today, I managed to get in touch with HMRC to see if I could get some clarity on the situation. The representative that I spoke to said that their understanding is that;
“Employers must increase the rates as they are set out by the government”
and the representative my client spoke to should not have told my client anything different.
And here’s my dilemma, with two contradicting statements from HMRC, do we try to find a third opinion?
Because if we take the 2nd representatives view on the situation to be true and my client replies to the initial letter saying that they have claimed correctly if HMRC then decides to change their mind again and investigate further, my client could risk getting a hefty fine.
Tax doesn’t have to be taxing... it just is.