Posted by James Sage, Partner
Social Care Compliance Scheme: HMRC creates confusion
Last month, in Royal Mencap Society-v-Tomlinson-Blake, the Court of Appeal held that ‘sleep-in’ shifts were not subject to the National Minimum Wage. The ruling, while providing welcome relief for care providers, left a few questions unanswered. One of them was how HMRC proposed to deal with providers who had joined the Social Care Compliance Scheme. HMRC has now provided further guidance, but has it brought any clarity?
On 17 August 2018, HMRC wrote to providers who had joined the Social Care Compliance Scheme (SCCS) stating that:
HMRC have decided that it is appropriate to continue to operate the Social Care Compliance Scheme (SCCS) allowing participating employers to complete a self-review, taking the judgement into consideration, and make a declaration to HMRC.
All original timeframes and requirements of the scheme remain in place:
- employers must complete their self-review and submit their declarations to HMRC by no later than 12 months of their application to the SCCS or 31 December 2018, whichever is sooner
- all non-sleeping time arrears must be paid before employers return their declaration
- any sleeping time arrears must be paid to workers within 3 months of returning the declaration or by 31 March 2019, whichever is sooner.
Department for Business, Energy & industrial Strategy (BEIS) are currently reviewing their guidance in Calculating the Minimum Wage and this will be published in due course.
Employers will be issued with an updated SCCS Employer guide once the revised Calculating the Minimum Wage is available.
HMRC states that “sleeping time arrears must be paid”
HMRC’s correspondence has left many providers confused following the Court of Appeal ruling in the Mencap case that sleep-in shifts were not subject to the National Minimum Wage. On the face of it, HMRC’s statement that “any sleeping time arrears must be paid to workers” is inconsistent with the Court of Appeal ruling that sleep-in shifts are not subject to the National Minimum Wage.
However, in our view this was a deliberate, albeit clumsy, attempt by HMRC to confirm that not all sleep-in shifts will be exempt from the National Minimum Wage. As we pointed out in our recent article in the Guardian , the Court of Appeal did not provide a blanket ruling that all sleep-in shifts are exempt from the National Minimum Wage; some sleep-in shifts may still be subject to minimum wage laws, For example, if sleep-in staff:
- are required to carry out regular checks (e.g. every 2 hours) on service users during the shift; or
- regularly have to get up and provide support a number of times through the night due to the complex needs of service users,
they may be deemed to be working for the entire sleep-in shift, rather than only ‘available’ for work.
Due to the lack of clarity over where the line should be drawn between when staff are ‘working’ or only ‘available for work’, HMRC has decided to leave the SCCS open and leave it to providers to decide on which side of the line their sleep-in arrangements fall. For some providers this will be straightforward, but for others less so.
It is expected that the BEIS guidance will provide some further clarity on this to assist providers make the necessary determination on their sleep-in shift arrangements.
It is important that the BEIS guidance is published promptly so that providers can take account of it before they submit their declarations of compliance (or non-compliance) to HMRC under the SCCS.
Should you remain in the Scheme?
HMRC are encouraging providers to remain in the SCCS and state that: “Failure to adhere to the terms or timeframes of the SCCS, or withdrawing from the SCCS may result in HMRC opening an investigation into your pay practices.”
You might be tempted to withdraw from the SCCS on the basis that you are compliant with the National Minimum Wage (now that sleep-in time doesn’t have to be included) and compiling all the information required by HMRC would be a waste of your time. If your withdrawal resulted in HMRC investigating you, you could simply provide all of the information they are requesting under the SCCS at that stage.
However, HMRC have told us that if you withdraw from the SCCS, you will lose the main benefit of being in the Scheme – the 200% penalty waiver. This isn’t a problem if you are compliant as no penalties would be due. But what if the Supreme Court accepts the appeal, and subsequently reverses the Court of Appeal decision? Sleep-in liability is back in play and you may have a financial penalty for arrears accrued during the time that you weren’t in the Scheme.
There will also be other factors for you to consider in reaching a decision whether to withdraw from the SCCS, including whether you have arrears for non-sleeping time.
We offer a free audit of your employment contracts, which will need reviewing in light of the Mencap ruling, to ensure you are properly protected.
For advice on any of the issues discussed, or your sleep-in pay strategy generally, please contact James Sage, partner and head of our Health & Social Care team, on:
0800 182 2493 Email us
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