Appeal No. UKEATS/0039/12/BI

EMPLOYMENT APPEAL TRIBUNAL
52 MELVILLE STREET, EDINBURGH, EH3 7HF

	At the Tribunal
	On 12 February 2013

Before
THE HONOURABLE LADY STACEY
(SITTING ALONE)

C & D DH LTD T/A ELITE HOMECARERS	APPELLANT

COMMISSIONER FOR REVENUE & CUSTOMS	RESPONDENT

JUDGMENT

	APPEARANCES

For the Appellant	MR D SMALL
(Advocate) 
Instructed by:
Davidson Chalmers LLP 
12 Hope Street
Edinburgh
EH2 4DB	
For the Respondent	MR I ARTIS
(Advocate)
Instructed by:
Office of the Advocate General for Scotland
Area G-G
HMRC Division
Victoria Quay
Edinburgh
EH6 6QQ	

SUMMARY
NATIONAL MINIMUM WAGE

The Appellant appealed to the Employment Tribunal against a Notice of Underpayment served by the Respondent under section 19 of the National Minimum Wage Act 1998.  The ET dismissed the appeal.  It found that the Appellant paid travel expenses which required to be deducted from the total payment from employer to employee under the National Minimum Wage Regulations 1999, regulations 30 and 31.  After making the reductions, the sums paid were less than the hourly rate for the minimum wage set by the regulations.  The Appellant argued that the ET had erred in law in their construction of the contract between parties and had erred in categorising the payments made as including anything in respect of travel expenses.  The Appellant argued that he had implemented an allowance for business mileage under the Income Tax (Earnings and Pensions) Act 2003.  The EAT found that the ET had not erred in law and had correctly found that the Appellant made payments in respect of business mileage which had to be deducted for the purpose of ascertaining the hourly rate paid to the employees.  The rate so calculated was less than the national minimum wage.

THE HONOURABLE LADY STACEY 
The Issue
1.	The issue between the parties was the interpretation of the National Minimum Wage Act 1998, which I refer to as ‘the Act’ and the National Minimum Wages Regulations 1999, which I refer to as ‘the regulations’.  The way in which income tax should be treated by an employer under the Income Tax (Earnings and Pensions) Act 2003, which I refer to as ‘the 2003 Act’ was also relevant.  The Appellant’s business was to provide care, 7 days per week, to elderly and infirm people in their own homes. In order to do so, the Appellant employed carers who drove their own cars between clients’ homes.  The carers were not all paid the same hourly rate.  The appeal concerned the correct categorisation and treatment of money said by the Respondent to be paid in respect of the cost of that travel.  The Appellant argued that he made no such payments, but operated a tax allowance scheme.

2.	This case originated in action taken by the Respondent under section 19 of the Act.  That section provides that where an officer of HMRC believes additional remuneration to be due to a worker or workers he may serve a notice of underpayment requiring payment to the worker in 28 days.  By section 19(7) the notice may relate to underpayment in the period of six years before service.  The employer may appeal against the decision to serve such a notice under section 19C to the ET.  The grounds of appeal are set out in section 19C(1)(a) and 19C(4).  Thus the appeal in this case was on the ground that no additional remuneration was due.  By section 19C(7) it is provided that if the appeal is successful the Employment Tribunal must rescind the notice.

3.	The Notice was produced in core bundle 5, dated 13 September 2011 and relating to work carried out by the Respondent in 2009.  It related to three employees, and four periods.  The first period was 19 May 2008 to February 2009, and the sum said to be underpaid was £2735.45. The second related to the period June 2008 to January 2009, in the sum of £1723.48. The third period was December 2009 to April 2009 and the last was March to April 2009, in the total sum of £651.68.  The Notice was served by the Respondent after a complaint was made by a worker, and after examination of some of the Appellant’s payroll records, and payslips.

4.	An appeal was heard by the ET. It found that the Respondent was correct in its categorisation of the payments made by the Appellant, refused the appeal and upheld the Notice by judgment dated 25 April 2012. The documents in the core bundle had been before the ET.

Preliminary Matter
5.	As a preliminary matter counsel for the Appellant sought to amend the grounds of appeal.  The original grounds of appeal were to the effect that the decision of the Tribunal should be quashed and the Appellant’s appeal allowed.  By letter of 30 August 2012 the Appellant sought leave to amend the grounds by adding the following to the remedy sought:

“and to remit the case to a similarly constituted Employment Tribunal with a direction that the tribunal should, after hearing submissions from parties, proceed to decide it afresh having regard to Regulations 31(1)(h) and 34(1)(b), National Minimum Wages Regulations 1999.”

Permission was granted for that amendment by decision notified on 4 October 2012.  On 25 January 2013 the solicitors for the Appellant by letter intimated an intention to seek leave for a further amendment by adding a first alternative remedy sought, in the following terms:

“To allow the appeal against the Notice of Underpayment, or alternatively.”

6.	Counsel moved to amend at the start of the hearing explaining that the need to amend was caused by mature reflection in preparing for the case.  The effect of the amendment would be to state as the Appellant’s primary position that the appeal should be allowed and the Notice rescinded, and to provide in the alternative that the case be remitted to the ET with a direction. Counsel addressed me on section 28 of the Act, in order to explain the mature reflection that had necessitated his seeking leave to amend the grounds of appeal.  The heading of the section is ‘Reversal of Burden of Proof’ and by section 28(3) it is provided that where in civil proceedings a person seeks to recover on a claim in contract the amount described as additional remuneration in section 17(1), it shall be presumed for the purposes of the proceedings that in relation to that amount the worker was remunerated at a rate less than the national minimum wage unless the contrary is proved.  At the ET it had been submitted by the Respondent, without contradiction, that this subsection applied.  Counsel argued that it did not apply, as the hearing before the ET was an appeal by the employer against a notice served by the Respondent and therefore was not a claim in contract.  Thus counsel argued that there is no reversal of the onus.

7.	Counsel for the Respondent did not dispute this.  He had no objection to the amendment but gave notice that he would argue that the appeal should be refused, but if it were to be granted he would argue against any remit to the E T giving a direction to consider regulations 31(1)(h) and 34(1)(b).

8.	The ET were led into error by the submissions made at the hearing to the effect that section 28(3) applied, putting the onus on the Appellant.  I accept counsel’s submission that the section did not apply.  I held however that it made no difference.  While the representative of the Respondent made such a submission at the ET she does not seem to have made any submission on the effect that the onus would have, and it is clear the ET considered all before them without having any particular regard to where the onus lay.

9.	Counsel for the Appellant also sought to add to the bundle section 359 of the 2003 Act, which he said was necessary to explain what the Appellant had done.  I allowed it to be lodged.

The Submissions for the Appellant
10.	It was agreed between parties that the workers about whom the Respondent had served notice were workers who were entitled to be paid the national minimum wage by their employer, the Appellant.

11.	Counsel for the Appellant provided a helpful note of his submissions.  He began by outlining the terms of the Act.  Section 1 provides that a person who qualifies for the minimum wage shall be remunerated by his employer in respect of his or her work in any pay reference period at a rate not less than the minimum wage.  The pay reference period in this case was agreed at one month.  The national minimum wage is an hourly rate, set from time to time by the Secretary of State. Enforcement of the provisions is dealt with by section 13 of the Act which enables the Secretary of State to arrange for any government department to act in these matters.  The Respondent acted in that capacity.  By section 17 a worker who is paid less than the national minimum wage is deemed to be entitled under his contract to be paid additional remuneration to bring him up to the level of the national minimum wage.  Such a worker has rights at common law and under the Employment Rights Act 1996 to take action in court to recover sums due to him.  The Secretary of State may also act for the worker in certain circumstances.

12.	Regulation 14(1) provides that the hourly rate paid to a worker in a pay reference period shall be determined by dividing the total calculated in accordance with paragraph (2) by the number of hours specified in paragraph (3).  Sub-paragraph (2) provides that the sum paid shall be calculated in accordance with regulations 30 and 31 to 37.  The total is calculated by subtracting from the total remuneration determined under regulation 30 the total of reductions determined under regulations 31 to 37.  Regulation 30 provides as follows:

“30. The total of remuneration in a pay reference period shall be calculated by adding together -
(a) All money payments paid by the employer to the worker in the pay reference period.”

The sub-paragraphs thereafter are not of direct relevance.

13.	Regulation 31 defines reductions which are to be made from the total calculated under regulation 30.  The relevant paragraphs are as follows.

“(f) any money payment paid by the employer to the worker to meet a payment by the worker that would fall within regulation 34(1)(b) (payments by workers on account of expenditure in connection with their employment to persons other than their employer) but for the worker’s payment being met or designed to be met by the employer; 
(g) Any deduction falling within regulation 32
(h) any payment made by or due from the worker in the pay reference period falling within regulation 34;
(j) any money payments paid by the employer to the worker in the pay reference period in respect of travelling expenses that are allowed as deductions from earnings under section 338 of the Income Tax (Earnings  and Pensions) Act 2003.”

Regulation 34 is in the following terms

“34. (1) The payments made by or due from the worker required to be subtracted from the total remuneration by regulation 31 (1)(h) are –
(a) any payment due from the worker to the employer in the pay reference period on account of the worker’s expenditure in connection with his employment;
(b) any payment paid in the pay reference period on account of the worker’s expenditure in connection with his employment to the extent that he expenditure consists of a payment to a person other than the employer and is not met, or designed to be met, by a payment paid to him by the employer;
(c) any other payment due from the worker to the employer in the pay reference period that the employer retains or is entitled to retain for his own use and benefit except for a payment required to be left out of account by regulation 35.
(2)To the extent that any payment is required to be subtracted by virtue of more than one sub paragraph of paragraph (1), it shall be subtracted only once.”

14.	Counsel for the Appellant argued that the Appellant did not pay any sums to the workers which had to be deducted.  He operated on behalf of the workers tax deductions to which they were entitled under section 231 of the 2003 Act.  He calculated taxable pay by multiplying hours worked by the contractual rate appropriate to the particular worker.  He obtained from each worker a form listing the miles driven by her when travelling between clients’ homes in the pay reference period, and then multiplied that figure by 40 pence, (or 25 pence if the mileage figure for the year exceeded 10000), being the figure allowed by tax legislation as a deduction from taxable income.  He deducted the figure for mileage from the taxable pay figure and then made such deductions in respect of income tax and national insurance as were appropriate.  Thus counsel argued the Appellant made no money payment in respect of miles driven by the workers.

15.	In order to explain the tax deductions, counsel for the Appellant referred to the 2003 Act, chapter 2, headed ‘EXEMPTIONS: MILEAGE AND PASSENGER PAYMENTS.’  He noted that section 229 provides that no liability to tax arises in respect of approved mileage allowance payments.  Mileage allowance payments are defined as ‘amounts ….paid to an employee for expenses related to the employee’s use of such a vehicle for business travel’.  By section 230 the approved amount for mileage allowance payments is 40 pence per mile for the first 10,000 miles and 25 pence per mile thereafter.

16.	Section 231 is in the following terms

“231 (1) An employee is entitled to mileage allowance relief for a tax year –
(a) if the employee uses a vehicle to which this chapter applies for business travel, and 
(b) the total amount of all mileage allowance payments, if any, made to the employee for the kind of vehicle in question for the tax year is less than the approved amount for such payments applicable to that kind of vehicle. 
 (2) The amount of mileage allowance relief to which an employee is entitled for a tax year is the difference between –
(a) the total amount of all mileage allowance payment, if any, made to the employee for the kind of vehicle in question, and if the employee uses a vehicle to which this Chapter applies for business travel, and 
(b) the approved amount for such payments applicable to that kind of vehicle.”

17.	Counsel argued that the Appellant made no payments of mileage allowance.  The employees were nevertheless entitled to tax relief at 40 pence per mile under section 231.  The employees were not paid any travel expenses, he argued, and so the amount of relief to which they were entitled was calculated in accordance with section 231(2) as 40 pence per mile for the first 10,000 miles and 25 pence per mile thereafter.  Counsel also referred to sections 337 and 359 to show that no deductions under other parts of the 2003 Act can be made when relief is available under 231, or payments are made in respect of the use.

18.	Counsel submitted that the employer reimbursed nothing to employees.  The employees got their agreed hourly rate minus income tax and national insurance contributions.  The amount of tax and national insurance varied, because it depended on the mileage travelled and the mileage allowance relief thereby obtained.  That was why the employer asked employees to give him details of the miles travelled.  He then multiplied that amount by 40 pence (or 25 pence as appropriate), and deducted that from the gross amount of wages before applying the usual deduction of tax and national insurance.  On some occasions that led to there being no tax or national insurance paid.  On some occasions the figure obtained by multiplying the number of miles by 40 pence was higher than the figure obtained by multiplying the hours worked by the agreed hourly rate for the employee.  If so, then a ‘negative taxable income’ figure was recorded. According to counsel that resulted in a carry forward of a tax allowance to the next pay period.

19.	The Appellant’s position was that the hourly rate he paid included all that the employee could get in respect of mileage.  Thus the Appellant did not make any payment in respect of mileage allowances, as set out in section 229.  If an employee did in fact incur mileage expenses, then she was entitled to deduct 40 pence per mile from her gross pay before tax was calculated.  The Appellant operated his payroll so as to take that tax allowance into account.

20.	Counsel then turned to the regulations.  He contrasted the provisions of regulations 31(1) (f) and 31(1)(h).  The first relates to sums paid by the employer to the worker to meet payment made by the worker.  The amount is that paid by the employer, which may or may not be the same as the amount paid by the worker.  The latter regulation refers to the amount actually spent by the worker.  Counsel had not appeared before the ET but understood that no alternative case had been present to the effect that regulation 31(1)(h) applied.  He noted that the time limit for the Respondent to serve a notice was six years, and therefore the Respondent could if so advised serve a notice under that regulation.  Counsel made no concession but submitted that regulation 31(1)(h) may apply to any payment made on account of a worker’s expenditure in a pay reference period in connection with her employment to the extent that the expenditure consists of a payment to a person other than the employer which is not met by a payment made to her by the employer.  He argued that this had not been argued before the ET and that it should therefore not be considered by me, but he stated that the matter had been obliquely referred to and in fairness he wished to put it before me.

21.	As a matter of completeness counsel referred to regulation 31(1)(j) which came into force in January 2011 and so did not apply to this case.  He noted its terms as follows:-

“31 (1)(j)
Any money payments paid by the employer to the worker in the pay reference period in respect of travelling expenses that are allowed as deductions from earnings under section 338 of [the 2003 Act].”

Counsel explained that the regulation would not apply in the current case, even had it been in force, as section 338 does not apply if section 231 does apply, all as provided by section 359 of the 2003 Act. Counsel argued that the purpose of the regulation had been to deal with schemes operated by some employers whereby low paid workers sacrificed some pay in return for tax free travel expenses. He referred to Reed Employment plc v HMRC [2012] UKFTT 28 (TC).  He stated that the Appellant was not operating a salary sacrifice scheme, and there was no need for me to be concerned with such schemes.

22.	I found counsel’s submission difficult to follow in light of the payslips at 10 in the core bundle.  Therefore I asked counsel to clarify what the Appellant did in relation to wages for his workers.  Counsel stated that the Appellant worked out how much tax relief an employee was entitled to under section 231 of the 2003 Act.  That figure was described by him as ‘non taxable pay’ in the payslips at number 10 of the core bundle.  In his written note of argument counsel stated as follows:-

“The appellant’s position is that the use of the term ‘non-taxable pay’ in this case (e.g. the  payslips at core bundle10) relates to that part of the employees’ pay which is tax free because it is equal to the allowable expense incurred by the employees. The use of the term ‘non-taxable pay’ does not mean that part of the pay was non taxable reimbursement of expenses.”

23.	Counsel attempted to clarify matters by giving examples.  He stated that if an employee worked for 40 hours at £7 per hour, she would earn £280.  If she drove 750 miles in connection with carrying out that work, her non taxable pay at 40 pence per mile would be £300 and £20 of negative pay would be recorded.  The practical result would be that she would have no tax deducted from her pay of £280 and she would have a tax allowance of £20 to carry forward.  She would not be paid £300.  I did not find that explanation of assistance in understanding what was shown in the payslips.  The first payslip shows:
Taxable pay 		114.41
	Non taxable 		402.00
	Sick pay		75.40

Total gross pay		591.81

The second payslip has only non taxable pay, in the sum of 439.81. 
The third payslip shows:
	Taxable pay 		 -3.82
	Non taxable		171.20
	Holiday pay		254.10

Total gross pay		421.48

Thus each payslip appears on its face to show a figure for non taxable pay which forms all or part of the remuneration paid to the employee.

24.	Counsel submitted that the employer did not check the mileage claims and went to so far as to say that he might have been suspicious about them.  This, counsel submitted, showed that the employer was not paying out on the claims as he would have an interest to be accurate if he were.  However counsel quickly recognised when I raised it with him that a responsible employer would be expected to be accurate when dealing with his employees’ tax.

25.	Counsel argued that the ET had erred in law in interpreting the contract of employment put before them in evidence.  He argued that the ET had no evidence before it from which it could conclude that the Appellant was reimbursing workers for expenses incurred.  He argued that the findings made by the ET were contradictory in that they had found that the workers were paid an hourly rate, and yet had found that they were reimbursed expenses.  Counsel argued that the ET had decided the case in paragraph 22 of the judgment but did not give a proper basis for their decision.  He argued that the statement of particulars of employment at 8 in the core bundle had been wrongly construed by the ET.  That document contained two statements which the ET had failed to construe properly, being firstly

“The company does not pay any travel expenses incurred whilst travelling between client homes.”
 
and secondly

“The hourly rate of pay you receive is inclusive of travel expenses incurred whilst travelling between client homes.” 

At the ET counsel then appearing conceded that there was a contradiction between these two terms and submitted that the ET should ignore the second, and find that the first governed the contractual position between the parties.  Counsel appearing before me took a different line.  He argued that the clauses were not contradictory.  They could, he submitted, easily be read together and the effect of them was that the hourly rate appropriate for the particular employee governed the pay she would receive, no matter how many or how few miles she drove.  He argued with extensive reference to authority that the proper construction of a contract involved giving meaning to all of the words in it, if possible.  He argued that the ET had effectively found as a fact that the hourly rate of pay included travel expenses.  Counsel submitted that there was nothing in the judgment to explain that.  He referred to paragraph 23 in which the ET stated that it accepted the respondent’s submissions that:

“the mileage allowance actually represented mileage expenses payments. The allowance was not only based upon the number of miles travelled by an employee in connection with their employment, it was also clearly calculated in accordance with the relevant HMRC Guidance [core bundle 18].”

26.	Counsel argued that that could not be correct as core bundle 18 applies to payments by employer to employee, as provided for by section 229 of the 2003 Act.  Counsel argued that the finding that HMRC’s scheme was being used lacked any rational foundation.  If the Appellant’s position was that he was applying appropriate tax deductions, then the fact that he allowed the sum of 40 pence per mile was simply because that was the figure in section 231 of the 2003 Act; it did not show that he was making payments to the worker in respect of mileage.

27.	As counsel for the Respondent did not dispute the arguments on contractual construction put forward by counsel for the Appellant I do not rehearse them.  As will be seen below the interpretation of the contract was not the vital question in this appeal.

28.	In conclusion counsel moved me to uphold the appeal and rescind the notice; if I was not with him on that, to remit with the direction sought.  He recognised that he was in a difficult position in seeking a remit, as the direction he sought were the case to be remitted was on a matter not raised before the ET.

Submissions for the Respondent
29.	Counsel for the Respondent’s motion was that ET judgment should be upheld and the appeal refused. He began by reminding me that the EAT should not interfere with the decision of the ET unless it had erred in law or unless it could be said that it had reached a decision that no reasonable tribunal could have reached, under reference to Neale v Hereford County Council [1986] ICR 471 at 483, counsel submitted that the ET’s job was to find the facts, apply the law and reach the conclusions to which their findings and experience led them.  He submitted that it would not be often that the EAT should find that the ET’s conclusion ‘offends reason’.  On the same theme, counsel submitted that a finding of mixed fact and law should be disturbed on appeal if and only if the ET has misdirected itself in law and no ET properly directing itself could have come to that conclusion, under reference to O’Kelly v THF [1983] IRLR 369, and BT plc v Sheridan [1990] IRLR 27.

30.	Turning to the provisions of the Act, counsel submitted that section 1(1) is very clear that people shall be remunerated by employer at a minimum rate.  It does not matter what contractual terms are entered into; section 2 provides that regulations may be made for the purpose of determining the hourly rate at which a person is to be regarded for the purposes of the Act as remunerated by his employer.  Thus the concept of the national minimum wage is a statutory construct.  While counsel for the Appellant argued that the ET had erred in law in interpreting the contract of employment put before them in evidence, the point was that no matter what were the terms of the contract, the employer was bound by the statute.  Counsel for the Appellant had argued that the ET had no evidence before it from which it could conclude that the Appellant was reimbursing workers for expenses incurred.  He had argued that the findings made by the ET were contradictory; in that they had found that the workers were paid an hourly rate, and yet had found that they were reimbursed expenses.  Counsel for the Respondent argued that all of that was beside the point.  The ET had before them clear evidence that the Appellant made payments to the workers which were covered by regulation 31(1)(f) and so required to be treated as reductions before the calculation of minimum wage was made.  He argued that regulation 31(1)(j) did not apply as it was not in force at the time, and had no relevance.

31.	Turning to the legislation counsel commended the approach taken by Elias J at first instance in the case of Revenue and Customs Commissioners v Leisure Employment Services Ltd [2006] ICR 1094, which was approved in the Court of Appeal, at [2007] ICR 1056.  Counsel argued that there is no discretion to be exercised; rather there is a statutory scheme which has to be construed.  He argued for a purposive approach.  He asserted that the policy behind the national minimum wage must be taken into account.  While the provisions of the contract may be relevant in finding the facts of a case, they are not determinative in deciding whether payments fall to be deducted under the regulations.  There should be a purposive construction and a realistic view of the facts. Counsel referred to Barclay Mercantile Business Finance Ltd v Mawson [2005] 1 AC for the proposition that the approach to statutory construction was to have regard to the purpose of a particular provision and to interpret the language, so far as possible, in such a way as to give best effect to the purpose.  It was clear in this case that the employer made payments to his employees which were calculated on the number of miles driven by them in connection with their work.  While the employer said in evidence that he paid an hourly rate and no travel expenses, his assertion is not definitive.  The ET required to make a realistic analysis of the facts of the case, and had done so.  Counsel referred to Revenue & Customs Commissioners v Annabel’s (Berkeley Square) Ltd [2009] ICR 1123, as authority for the proposition that a realistic analysis of what actually happened was needed.  He submitted that it was clear from the ET judgment and the documents in core bundle that the ET had carried out the requisite analysis.

32.	Counsel submitted that the ET was correct in finding that the employer made payment in respect of mileage.  The evidence all pointed in that direction.  Mileage allowance claim forms were completed, an example being 9 in the core bundle.  The payslips at 10 in the core bundle showed that payslips included ‘non taxable pay’ being the sum obtained by taking the number of miles travelled and multiplying by 40 or 25 pence.  The payroll records at 11 in the core bundle showed that ‘non taxable pay’ was ‘from mileage’.  The ‘visit schedule’ at 16 in the core bundle showed that hours were calculated without reference to the time spent driving between clients.  The Appellant’s document at 19 in the core bundle which addressed the issue of mileage, on the second page states:

“The company will normally reimburse employees in respect of any expenses wholly necessarily and proportionally incurred in the course of their work. The company reserves the right to refuse to pay any expense claim where the expenditure is unreasonable or unnecessary. 
Claims for expenses and business mileage must be supported by a completed expenses claim form giving full details of the journeys involved.”

Counsel submitted that that seemed to suggest, at least, that business mileage would be paid. Thus the situation, he said, was clearly one of reimbursement. He asked rhetorically what else could these payments be?  He submitted that they could not be categorised as anything else.

33.	Turning to the regulations counsel argued that, as set out in Revenue and Customs Commissioners v Leisure Employment Services Ltd the structure of regulations is that total remuneration has to be calculated in accordance with regulation 30.  All money payments paid by the employer are included.  Then reductions have to be made, in terms of regulations 31 to 37.  The essence of the regulations is that if a worker has to spend money to perform her work, then that money is not available to her as a reward for her labour.  The Act and the regulations exist to ensure that workers receive a minimum sum as reward for their labour, and so if they spend money in connection with their work which is not reimbursed to them, that money does not count; furthermore, if they spend money which is reimbursed to them, that money still does not count in calculating their reward for their labour.  Counsel sought to assist by giving the following example.

“If X employed a worker to be a one man call centre for 100 hours at £10 per hour, X would pay him £1000.  If the worker was responsible for provision of the necessary equipment, which costs £950, then the worker received only £50 for his labour.  If the £950 was said by X to be paid to the worker in respect of the equipment, then it had to be deducted under regulation 31(1)(f). If X simply said he paid £1000, then the £950 would be deducted under regulation 31(1)(h) as expenditure to a person other than the employer.”

According to counsel’s argument the cost of the equipment in his example was necessary for the work. For the purposes of the Act and the regulations, it had to be a reduction from the remuneration of the employee.

34.	Counsel argued that the statutory statement of terms, at core bundle 8 was inconsistent with the Appellant’s document headed ‘The issue of Mileage’ at core bundle 19, which concerns how the Appellant administered the contracts of employment.  The payslips at core bundle 10 showed a big variation in pay, and showed that the Appellant referred to ‘non taxable pay’ which was in fact made up of a mileage allowance.  Counsel argued that there was more than enough evidence for ET to decide that the payments made under that heading were mileage payments and so required to be deducted under regulation 31(1)(f).  Counsel argued that the ET at paragraphs 19 to 27 correctly set out the competing submissions put to them.  They were entitled in light of the facts which they found to prefer the submissions on behalf of the Respondent.  The ET correctly set out the law, encapsulated in paragraph 26 of the judgment.

35.	Counsel submitted that the appeal should be refused.  If I was not with him on that, he opposed a remit to the ET to consider the matter with reference to regulation 31(1)(h).  The argument had not been made at the ET and should not be admitted now.  Thus, if I were not minded to refuse the appeal, I should rescind the Notice.

Discussion and Conclusion
36.	The evidence before the ET included oral evidence from employer and three employees, along with the documents now in the core bundle.  In his evidence the Appellant asserted that he did not pay travel expenses and made reference to his contractual terms which he argued were to that effect.  In contrast to that there was evidence from the payslips and other payroll records, and the document at 19 in the core bundle that wages paid to the employees were made up of either solely an amount of money calculated by multiplying their business mileages by 40 or 25 pence, or a mixture of money in respect of hours worked multiplied by hourly rate together with an amount of money calculated by multiplying miles travelled by 40 or 25 pence.  There was no evidence before the ET which showed that the Appellant had been operating a payroll tax deduction.  All of the evidence from the documents was to the effect that he made payment of sums described in the payslips as ‘non-taxable pay’ which were calculated according to mileage.

37.	The ET got to the merits of the matter at paragraph 26 of the judgment where they found that the employees incurred expense in connection with their employment because they had to meet the cost of providing their own vehicles; the ET was clearly entitled to find that the money paid by the employer was in respect of miles travelled for business as it was calculated according to the number of miles travelled.

38.	Therefore counsel for the Respondent was correct to ask what these payments of money were if they were not payments made by employer to employee, in respect of miles travelled in connection with work, and to find that there was no other answer.  In any event, the submissions made on behalf of the Appellant did not appear to me to be based on fact, but rather on the Appellant’s assertion.  He appears to have calculated the wage due to any employee by multiplying her hours worked by her hourly rate; by deducting from the resultant figure a sum obtained by multiplying her miles travelled by 40 or 25 pence; by deducting tax and national insurance from that figure, (on some occasions the figure was negative) and then by adding back the figure obtained by the calculation involving mileage.  Thus the amount which the employee received as a wage consisted at least in part of a payment from her employer in respect of miles travelled by her, at her own expense.  Such a sum falls within the definition of regulation 31(1)(f), that is,

“any money payment paid by the employer to the worker to meet a payment by the worker that would fall within regulation 34(1)(b) …but for the worker’s payment being met or designed to be met by the employer.”

The vital point is that the employer is expecting the employee to bear the cost of travel, albeit with tax allowances; the purpose of the National Minimum Wage Legislation is to provide a minimum wage to be paid when the expenses of doing the work are taken into account, always excepting the cost of travel to work and other incidental expenses.  When reductions are made as required by the regulations, it can be seen that the sums paid are below the hourly rate proscribed by statute.

39.	I accepted the submissions made by counsel for the Respondent concerning the irrelevance of contractual terms.  I also accepted his submissions on the correct construction of the Act and the regulations.  I gratefully adopt the construction of the regulations set out in the case of Revenue and Customs Commissioners v Leisure Employment services Ltd.  It did not seem to me that any especially purposive interpretation of the Act and regulations was needed; a plain reading of the words of the statute makes clear that the sums of money paid required to be deducted.

40.	I did not find any error of law in the approach of the ET.  I therefore refuse the appeal.