HMRC's Social Care Compliance Scheme Update...Questions Remain Unanswered!

As Care Providers are sure to be aware, The long-awaited Court of Appeal Judgment on sleep-ins, published just last month, ruled that sleep in staff were working only when 'awake for the purposes of working', thereby delivering a welcome boost to providers who continue to be besieged by local authority cuts, high staff costs and turnover and ever more complex needs from their customers.

However, that was by no means the end of it, with Unison subsequently lodging an application to appeal to the Supreme Court to challenge the latest ruling. If, as expected, the application to appeal is granted, we will likely need to wait until late 2019 for a final decision on the case and the law surrounding sleep-ins.

Background

In light of the Court of Appeal's decision, big questions were asked of HMRC's much-maligned Social Care Compliance Scheme (SCCS), a scheme launched in November 2017 aimed at employers in the social care sector who may have underpaid their workers for sleep-in shifts, off the back of the initial Mencap case, which previously ruled (contrary to the current position) that care workers could be entitled to the National Minimum Wage (NMW) for hours spent on sleep-in shifts.

In the aftermath of the most recent Court of Appeal decision (in favour of providers), HMRC wrote to providers who had previously joined the SCCS to advise that they were considering the implications of the judgment and would issue further communication by Friday 17 August 2018. In the interim, providers were given two choices - either suspend the 'self-review period' (during which providers, with the assistance of HMRC, calculated the arrears they owed) or continue with the self-review period but take into account the latest Court of Appeal judgment. Providers waited on tenterhooks to find out what HMRC's posotion would be in light of the same.

HMRC's Update

In somewhat of a shock move, HMRC announced last Friday (17th August) that it would continue to operate the SCCS, original timescales and requirements included. In effect, this means that:-

  1. The self-review must be completed and their declaration submitted to HMRC confirming the outcome, by no later than 31 December 2018; and
  2. Any sleep-in arrears must be paid to any affected workers by no later than 31 March 2019, or within three months of returning the declaration (whichever is sooner).

This update is concerning on a whole number of levels, not least because of the lack of detail within the same. For instance, HMRC has failed to confirm what their approach to assessing sleep-ins will actually be. They state that the requirements of the SCCS will remain in place but, given that the SCCS was initially introduced on the back of the (now defunct) position that all time spent on sleep-ins should be counted for NMW purposes, how can this be possible??

As such, it is highly unlikely that HMRC can continue its original approach (i.e. that all time spent on sleep-ins should be counted for NMW purposes) in light of the recent Court of Appeal judgment. Indeed, the update itself states that 'HMRC have decided that it is appropriate to continue to operate the SCCS allowing participating employers to complete a self-review, taking the [Court of Appeal] judgment into consideration, and make a declaration to HMRC' .

Puzzingly however, HMRC does not make it clear, as one would rightly expect, whether all sleep-ins can be ignored in terms of working time for NMW purposes. This only serves to create further confusion for providers.

The update also makes reference to revised BEIS guidance on 'Calculating the Minimum Wage', which one can assume is likely to dictate what approach HMRC will take. HMRC has assured providers that they will be provided with an updated SCCS Employer Guide once the revised guidance from BEIS is available.

So....What Now?

This is likely to be the number one question on all providers lips. At its most brief, providers have the following options, all of which have pros and cons:-

  1. Remain in the SCCS for now and wait for the revised BEIS guidance 'Calculating the Minimum Wage';
  2. Leave the SCCS; or
  3. Remain in the SCCS and submit a 'zero-declaration' to HMRC for sleep-ins (relying on the current legal position).

Option 1 may, on paper, be the 'safe option' but it remains the case that time is quickly running out, not least with the self-review deadline now just 4 months away. Will we get this guidance well in advance of the 21 December cut-off?

Option 2 may prove too bold a step for providers but it does have the potential benefit of saving further administrative headache in calculating arrears (£13.5k estimated cost in tracking down ex-staff members and making back payments) whilst also offering potential savings, particularly if the Supreme Court dismiss the appeal from Unison.

Lastly, option 3 is likely to leave providers still waiting around nervously for the result of the Supreme Court judgment.

Lloyd Clarke is a health and social care expert and regularly advises client on legal issues facing the sector. If you are a provider who requires legal advice or assistance with the issue of sleep-ins or any other legal issue concerning your business, please do not hesitate to contact him on 01473 229240 or lloyd.clarke@attwells.com for a free consultation.