This case involved the HMRC’s use of its powers under Section 19 of the National Minimum Wage Act 1998, where they can serve a notice of underpayment where they believe a worker has received less than the national minimum wage in their employment.

They served a notice on the respondent, a football club who reached their heights by reaching the 2006 UEFA Cup final but had fallen to the Championship. The issue in this case was deductions taken from the pay of employees which brought their pay below the national minimum wage.  The deduction that was made was in relation to a football season ticket by instalments.

At first instance, the respondent club was successful in challenging the underpayment notice under Regulation 12(1)(e) of the National Minimum Wage Regulations 2015 which allows payment below the minimum where there are ‘payments as respects the purchase by the worker of goods or services from the employer’.  This was appealed by HMRC on the basis that the deduction could not be regarded as a payment which was required under the statutory definition.

The EAT found in favour of HMRC citing that Parliament deliberately contrasted between deductions and payments with only the latter being allowed in compliance with the national minimum wage.   Furthermore, the EAT outlined that the deduction worked in such a way to make more money freely available for the use of the respondent as it secured a payment for a season ticket.  The EAT relied upon the decision in HMRC v Leisure Employment Services Ltd stating that it was irrelevant that the employees also derived a benefit from the arrangement.

The EAT outlined that the purpose of the legislation was to ensure that low-paid employees were not disadvantaged but the limited exceptions also ensured that there was no need for extensive investigations as to whether the employee had a choice in making the purchase or not.  For this reason, HMRC was successful in its notice outlining that the football club had failed to pay the minimum wage.

Practical Lessons

This case demonstrates the scope that HMRC have in challenging employers where there is a failure to pay national minimum wage.  The EAT has adopted a restricted approach to the exceptions that can be applied by stating that it must be a ‘purchase’ rather than a ‘deduction’.

Interestingly, the EAT outlined that they did not want to have extensive investigations as to whether the employee actually wanted to purchase the item in question, which was a Middlesbrough season ticket.  It was probably for the benefit of Middlesbrough FC that there was no investigation, as to the employees wanted to buy the season ticket.
https://www.gov.uk/employment-appeal-tribunal-decisions/commissioners-for-hm-revenue-and-customs-v-middlesbrough-football-and-athletic-company-1986-ltd-ukeat-0234-19-la