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Car dealers are warned to make sure they’re paying at least minimum wage as HMRC focuses on sector

  • Tax authority is targeting car dealers over National Minimum Wage, say experts
  • BDO says ‘nudge’ letters are being sent to check that retailers aren’t underpaying staff
  • It says this could be a precursor to wider enforcement action
  • Car dealers are urged to be proactive and not ignore letters

Time 4:48 pm, September 12, 2023

Car dealers are being warned to make sure their staff are getting at least the National Minimum Wage.

Tax advice firm BDO said HM Revenue and Customs (HMRC) enforcement teams had been sending out ‘nudge’ letters to motor retailers to ensure they were complying and operating the system correctly.

Workers have to be at least of school leaving age to get the National Minimum Wage (NMW) and aged 23 to get the National Living Wage (NLW), with the NMW still applying for workers aged 22 and under.

The NLW went up by 9.7 per cent in April from £9.50 an hour to £10.42 an hour.

Elsewhere, the NMW for those aged 21 to 22 increased by 10.9 per cent from £9.18 to £10.18 an hour and the NMW for 18-to-20-year-olds rose by 9.7 per cent from £6.83 to £7.49 an hour.

Meanwhile, the NMW for under-18s and the Apprentice Rate both increased by 9.7 per cent from £4.81 to £5.28 an hour.

BDO said HMRC’s NMW enforcement activity had been increasing during the year and it looked as if the tax authority’s sights were now set on the car retail sector, based on a letter it had seen recently.

It warned: ‘Based on our experience of previous similar campaigns, this is a precursor to wider enforcement action.

‘In our view, taking proactive action is the only way for retailers to mitigate, as far as possible, both financial cost and reputational risk.’

The letter tells employers they should check they’re correctly paying at least the NMW and asks them to carry out a review.

It lists a number of areas that HMRC commonly sees as a cause of potential NMW underpayments, and encourages employers to check them out in detail.

In June this year, Arnold Clark – the most profitable UK car dealer in the Car Dealer Top 100 – was among 202 employers named and shamed by the Department for Business and Trade for not paying staff the minimum wage.

It was found to have underpaid 48 workers a combined sum of £12,215.56 between June 2015 and July 2018, averaging £254.49 of arrears per worker affected.

At the time, Low Pay Commission chairman Bryan Sanderson said: ‘The minimum wage acts as a guarantee to ensure all workers without exception receive a decent minimum standard of pay.

‘Where employers break the law, they not only do a disservice to their staff but also undermine fair competition between businesses.’

All 202 businesses were ordered to repay the workers and together faced penalties of nearly £7m because of the breaches of law.

BDO said: ‘Whilst the letter does not require a response, our experience tells us that silence from an employer can lead to HMRC determining that your business has a higher risk profile.

‘This may then lead to HMRC making direct inquiries with workers or conducting further research into the business, based on available public records, to determine whether opening a full NMW inquiry is appropriate.’

It added: ‘If you don’t receive a letter, this doesn’t mean you are “off the hook”.

‘What HMRC learns from each nudge letter campaign is fed back into its risk assessment to help identify where to deploy its direct enforcement resource – so it could be only a matter of time before you are approached.

‘Whether you receive a nudge letter or not, now is the time to consider taking action and to review your NMW processes and procedures as well as your payroll software.’

John Bowman's avatar

John has been with Car Dealer since 2013 after spending 25 years in the newspaper industry as a reporter then a sub-editor/assistant chief sub-editor on regional and national titles. John is chief sub-editor in the editorial department, working on Car Dealer, as well as handling social media.

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