Temporary reprieve for charities in minimum wage action

26 Jul 2017

The government has announced that it is temporarily suspending enforcement action against charities facing a total of £400m in demands from HM Revenue & Customs (HMRC).

Hundreds of learning disability charities faced insolvency within weeks following HMRC’s demand that they give care staff six years of back pay after the government changed the guidance last autumn on when the minimum wage must be paid.

Should the temporary reprieve be lifted and plans be enforced, about 200 organisations including Mencap would need to find an extra £400 million, while some councils have been cancelling contracts over the need to pay more to cover the higher wage bills.

Charities are warning that the sector will "implode in months" as a result of the revised guidance, should the government action go ahead.

HMRC announced yesterday that it was temporarily suspending enforcement action until 2 October to enable more discussions to take place.

A statement by the Department for Business, Energy and Industrial Strategy (BEIS) said it remains “equally committed to making sure workers in this sector receive the minimum wage they are legally entitled to, including historic arrears.”

At the same time, the BEIS has hinted at action to soften the blow for any charities faced with hefty back pay bills.

“The government will continue to look at this issue extremely carefully alongside industry representatives to see whether any further support is needed and ensure that action taken to protect workers is fair and proportionate, while seeing how it might be possible to minimise any impact on social care provision."

Over the past few years the charity and not for profit sector has had to cope with on-going changes to taxation legislation and it continues to face dramatic changes in their accounting and reporting requirements and regulatory environments.

Our Charity and Not for Profit accountants, business and tax advisers offer a comprehensive range of services to the sector.

In turn, if you require a CFO but you are finding the prospect of hiring experienced financial staff overwhelming, or you are daunted by the cost of taking on extra permanent staff, you can outsource your finance, business advisory and payroll function to us. Our experienced experts in this sector are available to assist.

Contact Steve Govey or your usual Beavis Morgan Partner for further information.