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Expenses don't count towards minimum wage

05 January 2011
Issue: 4287 / Categories: News , expenses , national minimum wage , NMW , Employees , Income Tax
HMRC warn of non-compliant umbrella business models

The National Minimum Wage (Amendment) (No 2) Regulations 2010 came into force with effect for pay periods starting on or after 1 January 2011, meaning that travelling and subsistence expenses eligible for tax relief under ITEPA 2003, s 338 will not count when calculating national minimum wage (NMW) pay.

The Department for Business, Innovation and Skills and HMRC are aware that a number of travel schemes and umbrella business models are being marketed to claim to continue to provide savings for the employer and be compliant with the NMW from 1 January.

The offered savings include:

  • paying subsistence expenses rather than travelling expenses;
  • classifying workers as directors;
  • holiday pay adjustments; and
  • under-recording hours worked

The Revenue says these measures do not comply with the requirements of legislation for workers paid at, or close to, the NMW; the department intends to take appropriate action against firms that seek to circumvent legislation by using such schemes.

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