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Going to VAR: HMRC win National Minimum Wage appeal on football season ticket payroll deduction scheme

Posted on 22 April 2020

The Employment Appeal Tribunal (EAT) has held that a football club's payroll deduction arrangement, made available to employees to allow them to pay for their club season tickets, breached the National Minimum Wage (NMW) Regulations. 

In Middlesbrough Football & Athletic Co, some employees of Middlesbrough Football Club requested that the cost of season tickets be deducted proportionately from their monthly payslips. 

HMRC considered that the deduction scheme was a technical breach of NMW Regulations as it involved deductions made by the employer for its own use and benefit, which did not satisfy any of the exemptions.

At the original Employment Tribunal, the Tribunal found in the Club's favour, holding that there was no NMW breach on the basis that deductions made by the employer are effectively the same as payments made by the employee.

HMRC appealed to the EAT and the Club brought a cross-appeal. The Club argued that the payroll deductions were for the employees' use and benefit, and made on account of an exempt loan arrangement.

Overall, HMRC's appeal was allowed and the Club's cross-appeals dismissed. The EAT held that Parliament deliberately distinguished between employee payments and employer deductions, so they should not be treated as the same.  The EAT also held that in determining whether deductions were made for the employer's benefit, there is no need to consider whether or not the employee has benefitted also. 

Notably, the EAT held that a deduction under a separate contractual provision with the worker would not necessarily be a permitted deduction for NMW purposes.  It is important to note that the judge clarified that he "did not have the benefit of prior authority" on this point, so this aspect of the judgment could be overturned on appeal (if an appeal is forthcoming).

As ever in cases such as these, the ability to factually distinguish the employer's position will assist in in demonstrating that there is no breach of the NMW rules if it runs a similar deduction scheme to the Club. Advice at an early stage is crucial to avoid repayment of 'underpayments', 'naming and shaming', and penalties.

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