Attachment of earnings guidelines and payment information for employers

Introduction

Administering Council Tax Attachment of Earnings Orders

• How does a Council Tax Attachment of Earnings Order (CTAEO) arise?
• What does a CTAEO look like?
• What duties does a CTAEO place on the employer?
• How should payments to the local authority be made?
• What about administration costs?
• How long does the CTAEO last?
• What happens if the debtor leaves my employment?
• What happens if an employer doesn’t comply with a CTAEO?
• What about duties on employees?
• What about duties on local authorities?

Calculating deductions

• What amount should an employer make a deduction against?
• What are net earnings?
• What are earnings?
• How much should be deducted?
• What if an employee is not paid in whole weeks and months?
• What if more than one series of regular payments is made to an employee?
• What if an employee is not paid at regular intervals?
• What if an employee receives both regular and irregular payments?
• What if a regular and irregular payment to employee fall on same day?
• How should advances for holiday pay be treated?
• How should other loans be treated?

Further Information

• Further help and advice

Annex A : Example of an Attachment of Earnings Order

Annex B : Legislation

Annex C : Deduction tables (Orders made before 1 October 1998)

Annex D : Deduction tables (Orders made between 1 October 1998 and 31 March 2007)

PAYMENT DETAILS

2.3.1 Introduction

This chapter is broken into three parts. The first (sections 1 to 10) explains how a council tax attachment of earnings order arises, what it looks like and how to deal with it. The second part (sections 11 to 21) explains how you calculate earnings and the appropriate deductions to make. The third part (section 22 and Annexes A to E) provides further useful information. Chapter 7 explains how you prioritise deductions when there is more than one order outstanding against one of your employees.

Note that this chapter applies to Council Tax Attachment of Earnings Orders (CTAEO) in England and Wales only. The system in Scotland operates differently and is covered in chapter 3.

Before the introduction of council tax in April 1993, local authorities were partly funded from April 1990 by the Community Charge (‘poll tax’). There may be very few instances where you are asked by a local authority to apply a Community Charge Attachment of Earnings Order. In an unlikely event of this happening, you should contact your local authority for advice.

Administering Council Tax Attachment of Earnings Orders

2.3.2 How does a Council Tax Attachment of Earnings Order arise?

When a local authority issues a Council Tax bill and a reminder but does not receive payment, it may apply to a magistrates’ court for a summons directing a person to appear before the court to explain why the council tax has not been paid.

If non-payment is proved, the court issues a liability order for Council Tax payable plus the costs incurred by the local authority obtaining the liability order. Once it has obtained a liability order, the local authority has a number of options, including attachment of earnings, for recovering the amount stated in the liability order.

If it considers attachment of earnings is the appropriate course, the authority will issue a CTAEO to the employer whom it believes has the debtor in his employment, sending a copy of the order to the debtor.

2.3.3 What does a CTAEO look like?

The format of the order is prescribed in regulations to ensure consistency of presentation and is therefore expressed in a rather formal way. The order states the name and address of the debtor (your employee), the amount they owe and requires that deductions are calculated, in accordance with the regulations, from net earnings. The order must be sent with the prescribed deduction tables and a copy of the regulations which deal with CTAEOs. You can find a copy of the order at Annex A and the relevant regulations at Annex B at the end of this chapter. Copies of the deduction tables can be found at annexes C to E.

2.3.4 What duties does a CTAEO place on the employer?

If you receive a CTAEO for someone who is no longer or has never been in your employment then you should inform the issuing authority within fourteen days in writing and your responsibility to do anything under the order will cease.

If the person who is the subject of the order is in your employment you should make deductions from their earnings. Sections 2.3.13 to 23 explain how you should calculate earnings and the deductions to be made. These deductions should begin as soon as possible after receipt of the order. The amount deducted by the 19 day of the month following the month in which the deduction was made.

You must inform your employee in writing about each deduction, and of either the total deductions made under the order to date or the outstanding balance to be repaid to the authority, when they are given his pay statement. If no pay statements are usually given, you must inform them in writing as soon as possible after making the deduction. In each case you must include the amount you have deducted or will deduct towards your administrative costs for operating the order.

2.3.5 How should payments to the local authority be made?

You can pay by sending the local authority a cheque for each deduction or a lump sum cheque covering all orders in respect of your employees for an individual local authority. You should send a paper schedule with a lump sum cheque setting out the CTAEO reference number and amount of each individual deduction within the total payment. You are not required to list CTAEOs where no deduction is due, although you may wish to do so to demonstrate there has not been an accidental omission.

The local authority will tell you if you can pay in any other way and may send you payment slips or other documentation to send with each payment. This will enable the local authority to process the payment more quickly and will ensure that the correct account is credited. Although you are not obliged to use such documentation if it is not convenient, you should always quote the amount deducted under each order and the CTAEO reference number ( you will find this is on the order). This is particularly important if you are making a single payment for several orders.

2.3.6 What about administration costs?

You may deduct £1 towards your administrative costs from your employee’s earnings each time you make a deduction under a CTAEO. This amount must be included when you notify your employee about deductions made.

2.3.7 How long does the CTAEO last?

Deductions should be made each pay day until the total amount specified on the order has been paid over to the authority or until the order is discharged by them.

2.3.8 What happens if the debtor leaves my employment?

If your employee leaves your employment, the order will lapse from the pay-day coinciding with or following termination of employment. You must notify the local authority in writing within fourteen days of the debtor leaving your employment. When the employee leaves your employment and you have notified the local authority nothing further is required of you. The local authority will have to serve a copy of the order on the new employer that will state the amount remaining to be deducted.

2.3.9 What happens if an employer doesn’t comply with a CTAEO?

A CTAEO is a legal document and an employer could be liable for a fine if they:

• fail to comply with the order unless they can prove all reasonable steps were taken to comply.
• fail to give all required notifications relating to the CTAEO.
• in giving notification make a statement which they know to be false in a material particular or recklessly make a statement which is false in a material particular.

2.3.10 What about duties on employees?

Within fourteen days of being asked to do so, your employee must write to the local authority giving:

• the name and address of their employer
• the amount of their net earnings and anticipated net earnings
• their place of employment, the nature of their work, and any pay reference/works number.
• Your employee must also write to the local authority within fourteen days of leaving your employment, or becoming unemployed or re-employed.

Employees could be liable for a fine where they fail, without reasonable excuse, to supply information or make a statement that they know to be false in a material particular.

2.3.11 What about duties on local authorities?

An authority must tell the employer when the whole amount to which a CTAEO relates has been paid, including when the payment was not made by means of a CTAEO.

An authority may, on its own account, or on application by the debtor or the debtor’s employer, make an order discharging the CTAEO. Where a CTAEO is discharged the authority should notify the employer.

Calculating deductions

2.3.12 What amount should an employer make a deduction against?

You should make a deduction against the total net earnings received by the employee.

2.3.13 What are net earnings?

For the purpose of these orders, net earnings mean:

• earnings after the deduction of income tax
• primary Class 1 national insurance contributions
• superannuation contributions and
• any deduction with a higher priority

How to deal with advances and loans is covered below.

2.3.14 What are earnings?

Earnings are defined as sums payable by way of:

• wages or salary (including any fees, bonus, commission, overtime pay or other emoluments payable in addition to wages or salary payable under a contract of service)
• statutory sick pay.

Earnings do not include:

• sums payable by public departments of the Government of Northern Ireland or of a territory outside the United Kingdom.
• pay and allowances of members of the armed forces (other than that paid by an employer to a person as a special member of a reserve force)
• benefit or allowances payable under any enactment relating to social security (this includes statutory maternity pay, statutory paternity pay and statutory adoption pay)
• tax credits
• allowances payable in respect of disablement or disability: and
• wages payable to a person as a seaman, other than as a seaman of a fishing boat.

2.3.15 How much should be deducted?

Once you have worked out your employee’s net earnings, you should use the deduction tables that the local authority will send out with the CTAEO to calculate how much should be deducted. Different levels of deductions apply depending on when the CTAEO was originally made. Annex C sets out the rates applicable for orders made prior to 1 October 1998. Annex D sets out the rates applicable for orders 1 October 1998 and 31 March 2007 and annex E sets out the rates that we propose will apply for orders made from 1 April 2007. All the examples assume that the CTAEO was made between 1 October 1998 and 31 March 2007.

Working out the correct amount to deduct from net earnings will usually be straightforward. You should simply find the attachable earnings range within which the employee falls in the first column of the deduction tables (weekly or monthly as appropriate) that the local authority will send you with the CTAEO and apply the appropriate percentage deduction rate from the second column.

If you pay your employee at intervals of whole months or weeks, but not each week or month, for example fortnightly, then you should simply divide the payment by the number of weeks or months to which it applies, calculate the deduction as normal and then multiply the resulting amount by the number of weeks or months to arrive at the total deduction to be paid over.

Example1 : You have received a CTAEO and you pay your employee fortnightly

• calculate your employee’s attachable earnings, e.g. £600
• divide this by two to arrive at a weekly figure i.e. £300
• identify from Table 1 (Annex D) the correct percentage deduction rate i.e. exceeding £260 but not exceeding £370 = 17%
• calculate the amount to be deducted on a weekly basis i.e.300 x 0.17 = £51
• multiply this by two to arrive at the total amount to be deducted i.e. £102

This leaves £498

Now:

• send the deduction of £102 to the local authority
• deduct £1, if you wish, from the remainder for making the deduction
• pay your employee the remainder, i.e. £497

2.3.16 What if an employee is not paid in whole weeks or months?

If an employee is paid at regular intervals, but not at intervals of a whole number of weeks or months, then net earnings should be divided by the number of days. The daily deductions table should then be used to work out the appropriate daily rate, which should then be multiplied by the number of days in the period.

Example 2: You have received a CTAEO and you pay your employee on the 10^th, 20^th and last days of each month. The pay period is 21-28 February.

• calculate your employee’s attachable earnings, for the pay period, e.g.£560
• find the daily attachable earnings i.e. £560 divided by 8 days = £70
• identify from Table 3 (Annex D) the correct percentage deduction rate i.e. exceeding £53
• calculate the amount to be deducted i.e. 53 x17% + 17 x 50% = £17.51
• multiply the deduction by eight = £140.08

2.3.17 What if more than one series of regular payments is made to an employee?

You may, for example, pay earnings to a salesperson on a weekly basis and pay them commission monthly. If this is the case, you should apply the appropriate table to work out the deduction for the series with the shortest interval between payments. This means that, if they are paid on a weekly basis but also receive a regular monthly sum, you should apply Table 1 to their weekly earnings. In addition, you should deduct 20% of the attachable earnings on a monthly basis.

Example 3: You have received a CTAEO and you pay your employee weekly and monthly.

• calculate your employee’s weekly attachable earnings, e.g. £200
• identify from Table 1 (Annex D), the correct percentage deduction rate, i.e. exceeding £165 but not exceeding £260
• calculate the amount to be deducted 1.e. £200 x 12% = £24
• calculate your employee’s monthly attachable earnings, e.g. £500
• calculate the appropriate deduction i.e. £500 x 20% = £100
• add the £24 and £100 together for payment to the local authority, deduct £1 for each deduction and pay the remaining amount to your employee

2.3.18 What if an employee is not paid at regular intervals?

If you pay your employee at irregular intervals, you should divide their attachable earnings by the number of calendar days since the last payment. You should then use Table 3 to work out the appropriate daily deductions, and multiply this figure by the number of days in the period.

Example 4: You have received a CTAEO and you pay your employee at irregular intervals.

• calculate your employee’s attachable earnings for each pay period e.g. £300 (1 April to 9 April); £700 (10 April to 20 April); £500 (21 April to 30 April)
• calculate the daily rate of attachable earnings for each pay period, i.e. £300 divided by 9 = £33.33
• 700 divided by 11 = £63.64 and

500 divided by 10 = £50

• identify the correct percentage deduction rate from Table 3 (Annex D), i.e. 12%;17% on the first £53 and 50% thereafter; and 17% respectively.
• calculate the daily deduction rate i.e. £33.33 x 0.12 = £4.00;

£53 x0.17 + 10.64 x 0.50 = £14.33;and

£50 x 0.17 = £8.50 respectively

• multiply by the number of days in the pay period to find the total deduction, i.e. 9 x £4.00 = £36.00;

11 x £14.33 = £157.63;and

£8.50 x10 = £85.00 respectively

2.3.19 What if an employee receives both regular and irregular payments?

You should apply the appropriate table to regular payments made to your employee. If you also make an irregular payment to your employee but not on the same pay day as regular payments, you should deduct 20% of the irregular payment.

Example 5: You have received a CTAOE. You pay your employee their regular monthly salary on 30 November and a Christmas bonus payment on 10 December

• Calculate your employee’s attachable earning e.g. £1,000 for the November salary and £200 for the Christmas bonus
• Identify the correct percentage deduction rate from Table 2 (Annex D) for the monthly salary payment, i.e. exceeding £660 but not exceeding £1,040 = 12%
• Calculate the deduction on the monthly salary. i.e. 0.12 x £1,000 = £120
• Calculate the deduction on the Christmas bonus, i.e. 0.20 x £200 = £40

2.3.20 What is regular and irregular payment to an employee fall on the same day?

if both a regular payment and in irregular payment fall due on the same pay-day., you should combine the two payments for the purpose of calculating a deduction and treat the combined payment as if it were a single payment made on the regular pay-day, applying the appropriate table to the whole sum.

Example 6: Facts as in Example 5 above except now the Christmas bonus is paid on 20 December at the same time as the regular monthly salaries for December

• Calculate your employee’s attachable earnings e.g. £1,200 for the December salary and Christmas bonus together
• Identify the correct percentage deductions rate from Table 2 (Annex D) for the monthly salary payment i.e. exceeding £1,480 =17%
• Calculate the deduction i.e. 0.17 x £1,200 = £204

2.3.21 How should advances for holiday pay be treated?

The amount to deduct is the aggregate of a) the amount that would have been deducted on the pay day if there had been no advance of pay: and b) the amounts that would have been deducted if the amounts Advanced had been paid on the normal pay day or days.

Example 7: You have received a CTAOE. In addition to their weekly salary you are paying your employee two week holiday pay in advance

• calculate your employee’s attachable earnings excluding the advance, e.g. one week at £200
• apply from Table I (Annex D) the appropriate percentage deduction rate i.e. exceeding £165 but not exceeding £260 = 12%
• calculate the deduction i.e. 0.12 x £200 = £24
• calculate your employee’s attachable earnings relating to the advance, e.g. £400 for two weeks
• divide this total equally between the future pay periods for which the advance is given, i.e. £400 divided by 2 – £200
• apply form Table I ( Annex D) the appropriate percentage deduction rate i.e. exceeding £165 but not exceeding £260 = 12%
• calculate the deduction i.e. 0.12 x £200 = £24
• multiply the weekly deductions by the number of weeks in the advance pay period i.e. £24 x 2 = £48
• pay over to the local authority the total deduction, i.e. £24 + £48 = £72
• note that since you are making a deduction from a single payment, only £1 may be deducted for administration costs

2.3.22 How should other loans be treated?

Loans made, for example, for the purchase of a season ticket or for helping with moving house, are not advances of pay and should not be counted as earnings.

The way that repayments of such loans are treated in calculating a deduction depends on the date that the CTAEO was made:

• for calculating a deduction under CTAEO made on or after 1 April 1995, the AEO deduction should be based on net earnings before any loan payment
• for CTAEOs made before 1 April 1995, net earnings should be reduced by the amount of the repayment made to the employer.

2.3.23 Further help and advice

You should contact the local authority that issued the CTAEO, as they will have a great deal of experience in the operation of CTAEOs in the first instance. If your query is about the interpretation of the regulations concerning CTAEOs then you may also want to contact the council tax policy team in the Department for Communities and Local Government at council.tax@communities.gsi.gov.uk

Annex A: Example of an Attachment of Earnings Order

Download MS Word example of attachment of earnings order (MS Word 21KB)

Annex B: Legislation

The powers to make Council Tax Attachment of Earnings are found in the local Government Finance Act 1992.

The rules under which Council Tax Attachment of Earnings Orders should be administered are set out in the Council Tax (Administration and Enforcement) Regulations 1992, SI NO. 1992/613. These have however been amended on a number of occasions, most significantly by SI No. 1998/295 to update the deductions table for orders made on or after 1 October 1998. The Government is proposing to further update the deductions tables from 1 April 2007. The original, revised and proposed deductions tables are to Annexes C, D and E respectively.

Annex C: Deduction tables for CTAEOs made before October 1998

Annex D: Deduction tables for CTAEOs made between 1 October 1998 and 31 March 2007

Annex E: Proposed Deduction tables for CTAEOs made on or after 1 April 2007