Fashion houses have long provided internships to young hopefuls looking to break into the industry. But this practice is under increasing scrutiny from the UK taxman – Her Majesty’s Revenue and Customs (HMRC) – amid concern that interns are in fact carrying out the work of employees, and should be rewarded for doing so.
As reported in the Daily Telegraph this morning, HMRC has sent cautionary letters warning that interns carrying out the duties of paid staff should be paid as employees. The taxman has confirmed that letters have been sent to the 102 fashion houses that exhibited during London Fashion Week this year. It has been reported that HMRC plan on carrying out a series of ‘spot-checks’ in the New Year to ensure fashion houses are complying with its rules on the treatment of interns.
The consequences of not treating interns as employees when they should be treated as such can be expensive. An employee should be paid at least the national minimum wage (currently £4.98 per hour for 18-20 year olds and £6.08 per hour for workers ages 21 and over). An intern would be entitled to back-pay from the date the internship began to the extent they have not been paid the minimum wage. In addition, the employer will have to pay employer’s national insurance contributions and account for PAYE. Interest and penalties may also be levied by HMRC.
Reaction on blogs and web forums frequented by would-be fashionistas hoping for an internship has been mixed. Whilst nearly all are happy their work will be financially rewarded, some have expressed concern that if internships become a cost to fashion houses, they will stop offering them.
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There is some light at the end of the runway for savvy designers however, as there is a key statutory exemption which allows designers to use interns without having to pay them the national minimum wage. Interns who undertake internships as part of a UK-based further or higher education course are not required to be paid the national minimum wage.
So start approaching those fashions schools.
To ensure you are on the HMRC’s ‘nice’ rather than ‘naughty’ list make sure that the internship will be treated as part of the course.
And you thought Christmas was over!