Tax amnesty for employers not paying minimum wage

05 August 2015

Andrew Hubbard

HMRC is increasingly looking at ‘naming and shaming’ as a way of encouraging good tax behaviours. We already have naming and shaming for deliberate defaulters, and there are proposals to extend it to serial avoiders. But this week’s publication of statistics reminds me that there is also a regime for naming and shaming employers who are not paying the national minimum wage (NMW), and I have significant concerns about the way this operates.

Employers who deliberately flout the rules get no sympathy, but I am concerned that HMRC’s approach may be counterproductive. One of the employers on the list had underpaid NMW of £4,070 – not a large figure in itself, but this covered 57 employees, meaning an average underpayment of £71 per employee. I know nothing about this case, but it looks to me like a simply a minor administrative failure rather than anything deliberate. But by being named, the employer risks being branded a cheat who exploits lower paid workers.

That cannot be right. Naming and shaming in any part of the tax system, if it is to be effective, must be targeted properly at those who really are abusing the system, not those who have got into a muddle or made minor technical errors.

The day after publication of this list, HMRC launched its latest campaign – for NMW violations! We are used to HMRC campaigns by now, but this one is rather different. All you have to do is to tell HMRC that you have unpaid NMW, and undertake to pay the arrears within two months. If you do this there is no HMRC investigation, no requirement to provide details and no penalties or interest. It’s the nearest thing to an amnesty I have seen in the tax system.

The timing here seems questionable. I am sure that those who were embarrassed by being included on the list for minor technical irregularities must have read the announcement the following day of the ‘amnesty’ through gritted teeth.

Some joined up thinking is required…