Julia Irvine 3 Jan 2019 03:23pm

MPs to probe HMRC £21m NMW claim against Iceland

The influential Treasury Select Committee is to question HMRC over its threat to land frozen food retailer Iceland with a £21m bill over a Christmas savings scheme which it runs for its employees

It wants to know why the department is investigating the Christmas Club – which HMRC claims is in breach of the national minimum wage (NMW) rules – when the scheme is voluntary, the money is ring-fenced in a separate bank account controlled by an independent trustee company whose directors are completely unconnected to Iceland, and staff can get their money back in its entirety at any time.

HMRC argues that, once the sums of money for the scheme are deducted from the employees’ pay packets, what is left is technically below the NMW. It does not matter that all the money is eventually returned to the savers: the NMW rules have been broken.

According to a report in the Times, HMRC suggests that Iceland has been underpaying NMW by £3.5m annually for the past six years.

Founder and chief executive Sir Malcolm Walker told the Times yesterday that HMRC’s action was “just madness” and that he would be fighting the claim through the courts if necessary.

In a statement, Iceland said that it was “somewhat irked at being pursued at potentially huge cost for a technical breach of the minimum wage rules over a voluntary deduction which has already been repaid in full to the participants”.

“The action seems particularly ill-timed given the well-publicised pressures from business rates and declining footfall from which all high street retailers are suffering,” a spokesperson commented.

He added that the total saved and repaid to employees in November 2018 was £3,727,755.33. Iceland has also paid £1.4bn in UK taxes since 2005 and donated £24m to charities through its charitable foundation.

In May 2018, Sir Malcolm used his weekly column in Retail Week to reveal not just the Christmas Club investigation but a second HMRC probe into “whether employees who choose to buy their own work shoes (even though we provide free ones as part of their uniform) might have been paid less than the minimum wage in the week they made their purchase”.

“You’d think HMRC might put more effort into chasing the £1bn of corporation tax successfully avoided by the likes of Apple, Facebook and Google, or the VAT dodged on Amazon and eBay for which they were castigated by the Commons Public Accounts Committee…,” he wrote.

HMRC said that it was unable to comment on individual cases. However, a government spokesperson said, “The rules are very clear and have been put in place to protect workers. The money that workers receive in their pay packets must be at least the national minimum wage with no exceptions.

“Where employers want to offer benefits to workers – including with Christmas savings schemes – they can easily establish a scheme in line with the law by getting workers to pay into that scheme after they’ve been paid rather than deducting the money beforehand.

“By consistently applying the law, we remove any possibility of a minority of bad employers using salary deductions to pay their staff less than the minimum wage.”

The spokesperson pointed out that, as part of the largest upgrade to workplace rights in a generation, the government had begun a consultation last month on the use of salary sacrifice schemes. “This will help us to ensure that the rules around salary sacrifice that HMRC enforces are fair and working as intended,” they added.