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Executive View: HMRC gives motor retail a "nudge" on minimum wage compliance

Chris Bond, head of motor retail at accountancy and advisory firm BDO, shares his thoughts on HM Revenue and Customs' interest in motor retail employers being compliant with the national minimum wage.

We are seeing a new focus for HMRC as they target motor retailers with a number of ‘nudge’ letters from their National Minimum Wage enforcement teams to ensure they are both compliant and operating the system correctly.

HMRC’s National Minimum Wage (NMW) enforcement activity has been increasing throughout 2023 and it appears that the tax authority’s sights are now set on the motor retail sector based on a recent letter we have seen.

Based on our experience of previous similar campaigns, this is a precursor to wider enforcement action. In our view, taking proactive action is the only way for retailers to mitigate, as far as possible, both financial cost and reputational risk.

What does the letter ask employers to do?

The letter advises employers that they need to check they are paying at least the NMW correctly and requests them to conduct a review. It lists a number of areas which HMRC commonly identifies as a cause of potential NMW underpayments and encourages the employer to check these issues in detail.

What could this ‘nudge’ letter campaign lead to?

Whilst the letter does not require a response, our experience tells us that silence from an employer can lead to HMRC determining that your business has a higher risk profile. This may then lead to HMRC making direct enquires with workers or conducting further research into the business (based on available public records) to determine whether opening a full NMW enquiry is appropriate.

If you don’t receive a letter, this doesn’t mean you are ‘off the hook’. What HMRC learns from each nudge letter campaign is fed back into its risk assessment to help identify where to deploy its direct enforcement resource – so it could be only a matter of time before you are approached.

Review processes and procedures

Whether you receive a nudge letter or not, now is the time to consider taking action and to review your NMW processes and procedures as well as your payroll software National Minimum Wage – a guide for 2023 - BDO 

The consequences of getting NMW wrong and trying to respond to this type of letter yourself can include penalties of up to 200% of any underpayment as well as being ‘named and shamed’ for breaching the NMW regulations.

Many of our NMW specialists are former HMRC officers and so understand the extent of HMRC powers in these types of enquiries - we can help you assess your options and plan the best course of action.

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