HMRC v Ant Marketing Ltd

The EAT has provided guidance on situations where deducting wages for training costs and accommodation expenses could put organisations in breach of minimum wage law.

As outlined in the National Minimum Wage Act 1998 (NMWA), and clarified by the National Minimum Wage Regulations 2015 (NMWR), workers must be paid at least the current rate of the minimum wage as set by the government. The law does permit certain deductions to be made from wage calculations that do not place organisations in breach of this; for example, if an employee is paid the minimum wage but has deductions made from their wages for pension and national insurance contributions, this will not be in breach of law.  Establishing the deductions that are allowed, and those that would actually serve to breach the law, can be tricky.  

An example of where the law is breached is outlined within Regulation 13 of the NMWR. This states that deductions paid from workers to the organisation ‘as respects to the worker’s expenditure in connection with the employment’, serve to reduce the amount of total earnings when considering compliance with the national minimum wage. This means that deductions made for expenses associated with their employment, for example the purchase of uniforms, should not put wages below the minimum wage.

In contrast, as outlined in Regulation 10 of the NMWR, deductions can be made ‘as respects the provision of living accommodation by the employer to the worker’. Basically, organisations can deduct an amount from employee wages to provide them accommodation, subject to a cap set by the government (otherwise known as accommodation offset) and not be in breach of minimum wage law. The accommodation offset is in place to prevent organisations attempting to recoup minimum wage paid to a worker through the provision of a place to live. Any amount deducted over this cap will, therefore, result in a breach.

In the case of Revenue and Customs Commissioners v Leisure Employment Services Ltd, the Court of Appeal explained that the wording of Regulation 10 must be deemed to be ‘purposive’ – in other words, the purpose behind their construction should be considered in their interpretation.  

Her Majesty’s Revenue and Customs (HMRC) reserve the right to investigate organisations suspected of not providing staff at least the national minimum wage, whether knowingly or not. It can also issue them notices of underpayment.


This case concerned a telemarketing business that required all new operatives to undertake mandatory, paid induction training. Due to the expense of this training, operatives were expected upon commencement of employment to sign a training agreement, which instructed they would remain in the service of the organisation for at least 12 months. If the operative left before this period was up, or did not complete the training, they would be liable to repay some of the training costs dependent upon the time they did remain in the organisation.

Some of the workers for the organisation were also tenants in a number of local flats, which, although not owned by the organisation, were owned by a separate company with the same managing director. As a result of this, some of the workers asked for their rent to be deducted from their wages and paid to the separate company. This was not a requirement of their employment.

The organisation was later issued with national minimum wage underpayment notices by the HMRC as a result of the training fees and the accommodation costs. As a result, it appealed against this underpayment notice to the employment tribunal (ET).


The tribunal considered the issue of potential underpayment associated with training and accommodation separately.

When considering the training deductions, the tribunal dismissed the organisation’s appeal. This was because the deduction fell within the remit of Regulation 13 of the NMWR. As this training was a mandatory requirement for the operatives, it was therefore the same as if they had been asked to purchase and wear uniforms to conduct their role. Therefore, the organisation was in breach of the law by deducting from their wages to fund this if they did leave early.

Their appeal was upheld, however, when looking at the accommodation issue. Although the rent paid through deduction did exceed the accommodation offset, the crucial point was that the flats were not technically owned by the organisation itself, but a separate company owned by its managing director. The tribunal ruled that the interpretation of an ‘employer’ as stated in the NMWR is defined in the NMWA as ‘the person by whom the employee… is employed’. Therefore, as the owner of the flats was not the ‘employer’, accommodation offset rules were not engaged.


Both the organisation and the HMRC appealed against the two rulings respectively.

The organisation argued that the tribunal had misinterpreted Regulation 13 of the NMWR, disputing that recouping training costs was a deduction for the purposes of this Regulation. However, the EAT upheld the tribunal’s ruling. They agreed that the training was mandatory, meaning it was no different to essential tools or uniform needed to conduct a role. It also made no difference that only part of the training costs were recovered; the NMWR did not require the deduction to be the full amount to be in breach of the law.

In relation to the accommodation issue, the HMRC argued that the tribunal should have took a ‘purposive’ approach to the interpretation of Regulation 10 of the NMWR as outlined in the Leisure Employment Services case. This was because the legislation had been designed to protect the rights of low-paid workers from organisations seeking to recoup their wages through accommodation. In this situation, the HMRC argued that the employer and the landlord were the same.

The EAT also dismissed this argument. They found that if they were to interpret Regulation 10 the way the HMRC outlined, they would have effectively been re-writing this statute. As the tribunal had outlined, the definition of an ‘employer’ had clearly been stated by the NMWA and if there was an intention by the NMWR to change this, it should have been more apparent. The EAT did also say, however, that they may have reached a different decision if there had been less of a focus on the definition of ‘employer’ and more if the organisation was not the landlord but could still be considered as having provided the accommodation.  

Note for employers

This ruling sends a clear message regarding the issue of training costs, stating it could serve to breach minimum wage law if they are recouped if this training is deemed essential to the role. This will depend on the circumstances of each case and organisations should proceed with care in these situations.

The EAT was also clear that this ruling should not embolden organisations to try and skirt round the accommodation offset rule by providing flats owned by a separate company. If organisationsa are connected with a landlord in some way, such as what is outlined here, they could face scrutiny as to the responsibility for the provision of this accommodation. As seen here, this case could have had a different outcome had this issue been pressed by the HMRC.

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