HM Revenue & Customs’ demands that disability charities pay up to £400m of back pay are likely to be "unlawful", a top lawyer has said.
This week Mencap warned that the disability care sector is “on the brink of collapse” with “multiple” charities facing insolvency after HMRC sent out demands for six years’ worth of back-pay for carers on "sleep-in" shifts, estimated to cost the sector up to £400m.
But Matt Wort, partner at Anthony Collins Solicitors, has said an internal guidance note to HMRC’s compliance staff, in use until 9 March 2016, shows the department was enforcing contradictory guidance at that time.
The guidance, published following an FOI request, reads: “To avoid escalation of complaints, workers have to be given detailed explanations of why you consider that they do not have to be paid national minimum wage for time spent sleeping (if that is your opinion after considering the facts).
“It doesn’t matter if the worker is required to be living on the premises – just because they are required to live-in, doesn’t mean they have to be paid for all that time.
“Time asleep usually is not working time. There may be instances where time workers are deemed to be working even if they are sleeping but these instances are expected to be exceptional and should always be referred to OAT for an opinion before calculating arrears.”
While the government has since published guidance that contradicts this, Wort said it would be “unlawful” for HMRC to demand back-payment is paid prior to March last year.
He said: “We believe [the internal guidance] reflects HMRC’s actual practice up until at least that date and we consider they are acting inconsistently by now seeking to prosecute providers in respect of a period for which other providers, who were only paying a flat rate for sleep-ins, were considered to be acting lawfully by HMRC.
“We consider it is unlawful for HMRC to now threaten to seek up to six years back payment.”
Most providers previously paid these workers a flat-rate of between £35 and £45 but new guidance, published by the Department for Business, Energy & Industrial Strategy last year, says minimum wage must be paid to workers even if they are asleep and uses a care home as an example.
It says: “A worker, who is found to be working, even though they are asleep, is entitled to the minimum wage for the entire time they are at work.
“Workers may be found to be ‘working’ whilst asleep if, for example, there is a statutory requirement for them to be present or they would face disciplinary action if they left the workplace. They would then be entitled to the minimum wage.”