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As social care providers eagerly await the Court of Appeal’s Judgment in Mencap v Tomlinson-Blake, the Social Care Compliance Scheme (“SCCS”) has issued providers in the scheme with a series of updated and new documents to assist with their National Minimum Wage (“NMW”) review. We have highlighted the key points from the documents below.
The new declaration form now contains the following:
- There has been an addition to the form to find out more about your business e.g. the care services provided and the size of the workforce. We presume that this is to understand how far reaching the SCCS believes the NMW arrears to be.
- You no longer need to determine how the underpayment of NMW came to light, but you do need to explain how you conducted your NMW arrears review, requiring a lengthier explanation as to the process used.
- There is now a workbook that must be completed detailing liability per individual employee.
- The form now requires a summary of arrears by tax year and lists eight tax years for which a summary needs to be completed.
- There is a requirement to declare that an uplift has been applied to the arrears and an option to say that you will be using the HMRC Alternative Payment Arrangement (“APA”).
- There is no longer a deadline for SCCS to come back to you in relation to confirming acceptance of the declaration, which was previously within four weeks.
The following key changes have been made to the Q&A document:
- “Where workers have been found to have been underpaid in the third year (from the start of the review), employers should extend their review to up to 6 years, or for as long as the risks which caused the underpayment exist, whichever is the shorter.”
This is the most important clarification to the documents provided, as this implies that social care providers need only go back three years from the start of their review, rather than the full six, unless in the third year. Therefore, it is in a providers’ best interests to start their review as late as possible. This approach will hopefully provide more clarity for those already within the scheme.
- There is further information provided in relation to holiday pay. In particular, it is recognised that additional remuneration may affects statutory holiday pay. The document confirms that HMRC does not enforce holiday pay and that there is no requirement to pay holiday pay under the SCCS.
The following documents are new and have been provided to assist those within the SCCS:
- Employer APA Guidance – This explains that providers in the SCCS can use an APA so they do not have to submit Earlier Year Updates to HMRC for each individual payment of arrears made. The Guidance explains how to deal with tax and national insurance due on any arrears.
- APA Employer Spreadsheet – This is an additional spreadsheet that needs to be completed by those in the SCCS. In the large part, it is a repetition of the information required for the Declaration Form, but poses an additional administrative burden for those looking to be part of the SCCS.
- APA Letter Template for Employer to Worker – This is a draft letter that the employer can send to the worker about any arrears that they owe following assessment. The letter sets out in detail what has been taxed and what is due to the worker, and may be a useful tool for those already in the SCCS who decide to pay arrears in due course.
- Pension Regulator Information – This document explains how the amount of sleep in arrears identified may mean certain workers reach the earnings threshold for auto-enrolment purposes. It expects you to make sure any such staff are auto-enrolled and the appropriate contributions paid unless they have previously opted out.
It is clear HMRC have been doing more thinking about the impact of the scheme and how to make their job easier when it comes to reviewing the declarations. The added complication of reviewing the pensions compliance now highlighted will be a further significant headache for providers. It will remain to be seen whether holiday pay claims will also follow from individual employees, but it is clear HMRC have no jurisdiction to enforce in respect of holiday-pay arrears.
Those providers currently in the scheme joined because HMRC had specifically invited them to opt in. We remain of the view that social care providers should not join the SCCS unless HMRC contacts them directly, inviting them to join.
It will be interesting to see what HMRC do with the SCCS scheme when we know the outcome of the Mencap appeal. If the appeal is successful we expect they will leave the scheme open but many providers will choose to leave the scheme (or submit a nil declaration).
If the Mencap appeal is unsuccessful we consider the scheme deadlines should be delayed until after the outcome of any appeal to the Supreme Court. Our expectation is that whatever the outcome of the Mencap appeal there will be an appeal to the Supreme Court.
Accordingly, we consider the scheme deadlines should be extended until at least six months following a conclusive Court decision on the issue of sleep-ins.
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