Revenue and Customs Comrs v Middlesbrough Football and Athletic Co (1986) Ltd

It is wrong to treat at-source wage withholdings as "payments" for the limited exception in regulation 12(1)(e) of the National Minimum Wage Regulations 2015. Deductions made by an employer that remain available for the employer's use are reductions of remuneration for NMW purposes. Regulation 12(2)(a) only exempts reductions triggered by some discrete conduct or event for which the worker is contractually liable. Regulation 12(2)(b) applies only to advances or loans of money and not to non-cash or instalment purchase arrangements.

The respondent employer operated a payroll deduction scheme by which employees paid for season tickets by instalments deducted from wages. HMRC served notices of underpayment under section 19 of the National Minimum Wage Act 1998. The Employment Tribunal rescinded the notices, concluding that regulation 12(1)(e) applied. HMRC appealed to the EAT. The central question was whether the instalment arrangements were "deductions" reducing reckonable pay, or "payments" falling within the exception in regulation 12(1)(e), and whether any other exception in regulation 12(2) applied.

1. The appeal is allowed and the Employment Tribunal's decision is quashed. The enforcement notices are reinstated. (Overall disposition.)

2. As a matter of ordinary meaning and on authority in LES, sums withheld at source constitute deductions and not "payments". Regulation 12(1)(e) is expressly limited to payments and therefore does not cover employer deductions of the present kind. No purposive reinterpretation is required or available. (See reasoning on language and legislative scheme.)

3. The instalments here were for the employer's "use and benefit" because the amounts were available to the Club and secured consideration for the season cards. That conclusion follows the approach in LES and is unaffected by the fact employees also obtained a benefit. (Apply [2006] ICR 1094; [2007] ICR 1056.)

4. Regulation 12(2)(a) does not apply. The exception requires an occurrence of conduct or a distinct event which triggers a contractual liability on the worker's part. The mere existence or making of a contractual obligation, or an ongoing instalment arrangement, is insufficient. The Tribunal was wrong to find no contractual commitment but correct to hold the exception inapplicable. (Guidance drawn from LES and Lorne Stewart.)

5. Regulation 12(2)(b) is confined to loans or cash advances. It does not extend to non-cash "loans" of goods or to instalment purchases of services. The arrangement here was a sale by instalments, not a loan of money, so the exception does not apply.

6. Argument that definitions or concepts from tax/PAYE (eg ITEPA 2003) should broaden "payment" is rejected. The NMW scheme pursues a distinct policy and Parliament deliberately used different language; regulation 10(n) shows where tax definitions were expressly imported. The Secretary of State's later enforcement direction under section 19A(2) does not affect these conclusions.

7. Practical outcome: the EAT substitutes a decision upholding HMRC's notices; cross-appeal is dismissed. (Order substituted restoring enforcement notices.)

• Employment Appeal Tribunal: Allowed the appeal of HMRC; quashed the Employment Tribunal decision and reinstated the notices ([2020] UKEAT 0234_19_2003).
• Employment Tribunal: Employment Judge A E Pitt (hearing Feb 2019) rescinded HMRC notices of underpayment. (Decision reversed on appeal.)