Social Care Compliance scheme – an update

In a news piece last year we highlighted that there were a number of unanswered questions around HMRC’s new Social Care Compliance Scheme. Here we provide an update.

On 1 November 2017, HMRC introduced the Social Care Compliance Scheme, aimed at employers in the social care sector (including individual employers who have taken on their own carers or personal assistants) who may have inadvertently underpaid their workers for ‘sleep-in’ shifts.

This scheme was introduced following the decision in the Mencap case, which, after many years of confusion in this area, confirmed that care workers can be entitled to the NMW for hours spent on sleep-in shifts.

It is worth noting that Mencap have recently appealed the decision in the Court of Appeal and a decision is expected in June/July. In the meantime, we can provide you with the following updates to some of our unanswered questions.

We advised in a news piece at the time:

‘It is not yet clear whether and how the Government may be able to offer support to employers to help them pay for the underpayments. It is not clear how ‘sleep-ins’ interact with the accommodation offset which is the amount that can be counted towards the minimum wage when living accommodation is provided. Nor how the arrears payments should be dealt with through the payroll, and the potential impact on the worker’s tax, National Insurance, pension or benefits position on receipt of the arrears payments’

We will deal with each item in turn:

Government support for underpayments

According to this recent House of Commons library briefing summarising recent developments relating to payment of the national minimum wage for sleep-in care duties, it seems the Government are still in talks with the EU on the subject of state aid for affected employers. 

Accommodation offset

HMRC’s NMW manual says that ‘living accommodation’ is provided when a worker is provided with access to and free use of a bed (this can be in a shared room) and washing facilities (these may be shared with other residents but must afford some degree of privacy) and toilet facilities (these may be shared, but again, must afford some degree of privacy).

It is certainly arguable that this would cover many sleep in workers, meaning that where accommodation has not been charged for, it may well be possible to deduct the accommodation offset in calculation any sleep in underpayment.

This seemed to be confirmed by HMRC when we phoned the HMRC helpline to query the matter; however we do not recommend you rely on this.

Payroll procedures

Our friends at the Chartered Institute of Payroll Professionals have posted a news article summarising the reporting arrangements for Social Care employers’ arrears payments.

In it, it is confirmed that to help pay the tax on arrears related to sleep-in shifts, all Social Care employers have the choice of using an alternative PAYE arrangement (APA) or HMRC’s business as usual procedures. In brief, the APA allows employers to calculate tax at 20% on the taxable sum without reference to the allowances or tax code for the years concerned.  

There are further links to:

  • HMRC’s Employer Guidance
  • A spreadsheet for employers to return to HMRC showing amount of arrears paid, the year they relate to and tax deducted
  • A letter for employers to issue to workers when arrears payments are to be made
  • Pension Regulator quick guidance

We hope you find this update helpful, however our overriding advice remains that you should seek independent and professional advice to determine whether you have failed to comply with the NMW rules before taking any action around the SCCS.

This may be from your direct payments adviser, from ACAS or from a local lawyer. As an employer, you may have had employer's insurance. If you still have a live policy, note that some insurance companies offer access to employment law specialists as part of their employer policies.