Attachment of Earnings Orders

The Department for Constitutional Affairs is piloting a range of new measures for the more effective collection of fines, including a new type of attachment of earnings order (Schedule 5 AEO) that uses the same calculation tables as those used for Council Tax orders. Details of the new orders were given in the Newsletter of 4 April 2004.

Existing legislation provides for the consolidation of attachment of earnings orders that are made under the Attachment of Earnings Act 1971 (1971 AEOs), allowing for a single deduction to be made from an offender's earnings to satisfy a number of orders.

Further Regulations have now been brought into force to extend the facility to consolidate orders to the new Schedule 5 AEOs. Magistrates' Courts and their fines officers now have the powers to consolidate both 1971 AEOs and Schedule 5 AEOs into single orders. The consolidated orders use the new percentage tables for calculating the deductions.

These new provisions apply only in England and Wales. They are part of a pilot scheme that will operate until March 2005, although it is expected that these new arrangements, amended as appropriate in the light of experience, will continue beyond that date.

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...back to 11 June 2004

Source: www.hmso.gov.uk/si/si2004/20041407.htm

Child Support Agency

The latest issue of the Child Support Agency's Open Door magazine has been published. This edition contains articles which will be of interest to professionals with an interest in child support matters.

The CSA has also published its business plan, with information about the Agency's aims and priorities for the coming year.

Discuss this news item in the PayPerShop Forum

...back to 7 May 2004

Sources: www.csa.gov.uk/newcsaweb/opendoor/opendoor.pdf
www.csa.gov.uk/pdf/business plan/csabp2004.pdf

Attachment of Earnings Orders - pilot schemes

In the Newsletter of 12 March 2004, we provided detailed information on the new Attachment of Earnings Orders that are to be issued by magistrates' courts from April 2004 onwards. The timing of the legislation and guidance on these new arrangements has not allowed employers and payroll system developers to prepare for the changes.

We asked the Department for Constitutional Affairs (DCA) to comment on a number of the issues raised in the Newsletter item and on the means by which the changes will be communicated to employers and system developers.

We have now received a written response from a Senior Policy Manager at the Magistrates' Courts Administration Division. It states that the DCA has had "consultation with representatives of employers' organisations and also with a representative of Rebus, which provides 40% of the country's payroll systems. These consultees have undertaken to assist DCA with notifying employers of the impending changes."

The three representatives involved in the consultation are from the Institute of Payroll and Pensions Management, LogicaCMG and Rebus Payroll Systems.

Responses to questions
The DCA has also provided comments on the various issues that we raised in the Newsletter item. Our questions, and the DCA's answers, are as follows:

(1) Regulation 4 of the Fines Collections Regulations, which makes modifications to the Attachment of Earnings Act 1971, appears to indicate that the new method of calculating the AEOs issued under the Regulations applies only to those issued by magistrates' courts. It indicates that the new rules apply only to AEOs issued under the provisions of Schedule 5 of the Courts Act 2003. Is this the case? If new AEOs are issued by county courts or the High Court from April onwards, will those orders continue to be defined in terms of a PER and an NDR, or will they also use the percentage calculation as used for Council Tax AEOs?

It is only fines imposed in the magistrates' courts coming under Schedule 5 (Courts Act, 2003) orders which are subject to the new fixed tables system. Existing impositions upon which AEOs have been made in the past will continue with the old system AEOs until such time as they come back before the court (i.e. they fail) when new Schedule 5 orders can be made on them. The Courts Act pilot regulations do not apply to High Court or County Court orders.

(2) Whether or not the AEOs issued by higher courts are calculated according to the old or new method, do the new AEOs issued by magistrates' courts have the same priority as

• those already issued by those higher courts and that are currently in force, and
• those that will be issued by those higher courts in future?

The Regulations do not change the priority of fines AEOs (which remain priority orders).

(3) The existing rules allow two or more AEOs for fines to be applied at the same time. Do the rules change for the new AEOs? As the calculation method is the same as that used for Council Tax AEOs, and the number of Council Tax AEOs that may be applied at any one time is limited to two, is there a similar limit applied to the new AEOs issued by magistrates' courts, or to any combination of AEOs issued by any of the courts that may issue AEOs?

The number of fines AEOs issued by magistrates' courts which may be applied at any one time is limited to two, as with Council Tax AEOs.

(4) The percentage deduction table, as included in the Fines Collections Regulations, uses the employee's "net earnings" to define the level at which each percentage applies. This term is not defined in either the Attachment of Earnings Act 1971 or the new Regulations. Does it mean the same as the term "attachable earnings" as used in the 1971 Act? or does it have the different meaning as the term "attachable earnings" as used for Council Tax AEOs? or does it mean something different altogether?

It means the same as the term "attachable earnings" as issued in the 1971 Act and its subsequent regulations, which is also, I think, the same as the council tax meaning.

(Comment: The definitions of "attachable earnings" for AEOs and CTAEOs are marginally different:

• attachable earnings for AEOs include pension payments but exclude the guaranteed minimum pension element of pension payments
• attachable earnings for Council Tax AEOs exclude pension payments.)

(5) Student loan deductions, as issued by the Inland Revenue, may also be applied while an AEO is in force. However, they may not be applied while a Council Tax AEO or any other percentage-based order is in force (such as the Scottish orders). As the new AEOs are percentage-based orders, does that mean that

• a student loan deduction already in force would have to stop if a new AEO were received by the employer, and
• a new student loan deduction could not start until an existing new AEO were completed?

Yes, student loans would be blocked by fines in the same way as they are presently. (However, the new legislation does not set this out categorically). If there is a '71 Act or priority or a DEO (CSA), the student loan goes ahead but the employer will need to take into account the PER from the latest issued AEO to use to reduce the available money to make the student loan deduction.

(6) Having spoken to one of the leading payroll software developers, it appears that there has not been any communication between the DCA and the developers about these new AEOs and the way in which they should be implemented within their systems. When will such guidance be issued? Will it be issued through the Inland Revenue, who regularly issue guidance to developers, or will it appear on the DCA website? When will guidance be given to employers? Will it appear on the DCA website, or by amending the Court Service AEO Handbook, or will the orders themselves provide the necessary guidance, including guidance on the matters that I have queried above?

All of the items you mention and through our consultees. The individual magistrates' courts have the responsibility of updating their orders and notices to employers about the new Schedule 5 Attachment of Earnings Order but I am also working on a useful employer's leaflet which encompasses advice on both old and new systems. However, the AEO Handbook, which is issued by DCA Civil side, is not due for completion for some time and we are therefore not relying on it to disseminate the information in a timely fashion. The leaflet will be handier when it is ready (which will be sooner).
...back to 4 April 2004

Deduction from Earnings Orders

The Child Support Agency's website is effectively two sites in one, the original site providing guidance on assessments for child maintenance under the rules that applied prior to March 2003, and a new site with information on the new child support scheme that took effect from 3 March 2003.

The employer's pages on the new website include a number of useful links in connection with the operation of Deduction from Earnings Order (DEOs) that operate under the new rules. These include

• booklet CSL115 Advice for employers, providing guidance on administering DEOs
• a leaflet Paying child support maintenance direct from your earnings, for issuing to employees
• a form CSA 802 Schedule of payments, to use when reporting deductions for more than one employee
• an Excel spreadsheet, designed to help employers calculate protected earnings levels (although it appears to calculate the protected earnings proportion incorrectly)
• a factsheet about the changes
• a Frequently Asked Questions section for employers

A link is also provided to the Court Service's Attachment of Earnings Employer Handbook, but the link is only to the Court Service home page. The full address of the Handbook is given below.

The key differences between the new style and old style DEOs are as follows:

• the reference number for the employee is the National Insurance Number instead of the Child Support Reference Number
• only one DEO is in force at a time; if a new order is issued it replaces all previous orders
• the "protected earnings rate" (PER) is now known as the "protected earnings proportion" (PEP)
• although any part of the normal deduction rate (NDR) that cannot be deducted in one pay period is carried forward to the next, that PEP is no longer carried forward to a subsequent pay period if the employee's net earnings are lower than the PEP.

Booklet CSL115 contains a number of worked examples of the new-style DEOs.
Sources: www.csa.gov.uk/newcsaweb/advisors/deo.asp
www.csa.gov.uk/newcsaweb/faq/employers.asp
www.csa.gov.uk/newcsaweb/pdf/employers2.pdf
www.courtservice.gov.uk/cms/media/a_e_handbook.pdf
...back to 26 March 2004

Attachment of Earnings Orders - pilot schemes

The Courts Act 2003 makes changes to the way in which magistrates' courts handle the making and enforcement of attachment of earnings orders (AEOs). The Act makes provision for the introduction of fines officers and new rules for the circumstances in which an AEO will be made. The new arrangements for AEOs and other new provisions of the Courts Act 2003 will be piloted in different parts of England and Wales between February 2004 and March 2005.

Background
The Courts Act 2003 received Royal Assent on 20 November 2003. It implements the court-related recommendations of the Auld Review and the Government's subsequent White Paper "Justice for All" published on 17th July 2002. Among those recommendations is the establishment of a single centrally-funded agency, part of the Department for Constitutional Affairs, to replace the Court Service and the Magistrates' Courts Committees (MCCs) that are responsible for the administration of magistrates' courts. The Act also makes provision for a number of other changes relating to judicial matters and to civil and family court procedure.

The Act provides for the abolition of MCCs and the transfer of MCC employees to the employment of the Lord Chancellor under the provisions of TUPE. As a result of this change, lay magistrates, or justices of the peace, will have national jurisdiction.

At present, England and Wales are divided into commission areas and petty sessions areas.

• Commission areas are the areas to which magistrates are appointed, on the basis of the place where they reside. Most summary offences must be tried in the commission area where the alleged offence took place.
  
  
• Commission areas are divided into one or more petty sessions areas. These are the areas to which lay magistrates are assigned. They are the "benches", the basic unit of local magistrates' court organisation.

The Act abolishes commission areas and petty sessions areas and replaces them with "local justice areas". Although this will have the effect of giving lay magistrates a national jurisdiction, the Lord Chancellor is obliged to assign lay magistrates to a local justice area, thereby preserving the bench system in statute. Initially, the local justice areas will be the same as the existing petty sessions areas but they may be varied subsequently, following consultation.

To give effect to these changes, the Act sets out a variety of measures that will affect the appointment, training and appraisal of lay magistrates, the appointment of District Judges, and the work of justice's clerks and assistant clerks, none of which measures are directly relevant to this discussion. However, among these changes is the creation of a new role of "fines officer" who will be able to take enforcement action in certain circumstances, thereby removing much of the administrative work involved in enforcing the payment of fines from magistrates themselves. The Act, in its Schedule 5, sets up a fines collection system that introduces

• financial incentives to offenders to pay their fines, and
  
  
• a range of new disincentives for fine default, including wider powers to make AEOs and deductions from benefits applications (DBs).

The Act provides for the new system to be piloted and, if necessary, modified before a permanent scheme is introduced.

Collection of fines
Schedule 5 of the Act makes provision, following criminal proceedings, for the payment and enforcement of fines, costs and compensation. Fines officers will be able to take enforcement action quickly and, in many instances, without the need for a court hearing. The fines officer will issue a "collection order", setting out the amount of money due, the payment terms, and whether it may be paid immediately or will be subject to an AEO or a DB application.

As long as the offender has not already defaulted in paying a fine (including traffic fines), there is provision for a discount of up to 50% of the fine if it is paid immediately or within a defined period of up to 10 days. The discount does not apply to the amount of any costs or compensation.

If the offender is an existing defaulter or fails to pay the fine within the defined period, responsibility for enforcement falls on the magistrates' court. The court must either

• immediately make an AOE order if the offender is employed, or
  
  
• immediately apply to the Secretary of State for Work and Pensions for a DB,

unless it would be impracticable or inappropriate to do so.

A deductions from benefits application (DB) applies where an offender is not in employment but is receiving state benefits, specifically income support or jobseekers allowance.

An offender who is not an existing defaulter may request to pay the fine, and any costs and compensation, by means of an AEO or DB instead of paying it immediately.

If an AEO fails, because the employer fails to comply with the order or the employee leaves the employment, the fines officer may write to the offender and require payment of the outstanding amount under the terms originally defined in the collection order, or under new agreed terms.

If the offender then defaults on the collection order, the fine (but not any costs or compensation) may be increased by an amount to be defined in Regulations, but by not more than 50%. The offender may then choose to pay the fine in full immediately, in which case the increase is waived. Otherwise, subject to an appeals process, the magistrate's court may take one or more steps against the defaulter, i.e.

• issuing a distress warrant, enabling possession to be taken of the offender's property
  
  
• registering a judgement, thereby affecting the offender's credit rating
  
  
• making a further AEO or DB application
  
  
• making a clamping order, thereby immobilising the offender's vehicle, and subsequently selling the vehicle
  
  
• taking any other measures to be defined in Regulations.

Schedule 6 of the Act also makes it possible for offenders to discharge fines by performing unpaid work.

Pilot schemes
Between February 2004 and March 2005, this new regime for fines will be tested in a series of pilot schemes throughout England and Wales. Different aspects of the rules will be tried out in different areas. The arrangements are set out in The Collection of Fines (Pilot Schemes) Order 2004 and are supported by The Fines Collection Regulations 2004, both of which will cease to have effect on 31 March 2005. After the results of the pilot schemes have been evaluated, new and final Regulations will be issued.

The new provisions for AEOs and DBs will operate in all petty sessions areas in England and Wales. Other Schedule 5 provisions, i.e. collection orders, increase in the fine on first default, registration of fines and clamping of vehicles, will be piloted in various petty sessions areas in Cambridgeshire, South Yorkshire, Cheshire, Cumbria, Devon and Cornwall, and Gloucestershire.

Calculating AEOs
Until now, the operation by employers of AEOs has involved deducting as much of the defined "normal deduction rate" (NDR) as possible from what is left of the employee's "attachable earnings" after deducting the defined "protected earnings rate" (PER).

The new AEOs do not operate in this way. There is no concept of the NDR and the PER. Rather, the AEOs that are issued by all magistrates' courts during the pilot scheme period will use the same method of calculation that is used for Council Tax Attachment of Earnings Order (CTAEOs), using percentages that vary according to the employee's "net earnings".

The percentage deductions are as follows:

A change to the rules for calculating AEOs may be welcome, insofar as the percentage of earnings method is much simpler than the calculations using NDR and PER values and the possibility of carrying forward unused amounts to the following pay period. There are, however, a variety of problems with the new orders, not least that the Department for Constitutional Affairs has not yet published any guidance for employers and software developers. In the absence of any guidance other than that provided in the Regulations for the pilot scheme, the following points appear to be important:

• The new percentage deduction tables refer to the employee's "net earnings". This term is not defined in the Attachment of Earnings Act 1971 or in the new Regulations. It may be assumed to mean the same as "attachable earnings", as defined in the 1971 Act.
  
  
• It is not clear whether there can be more than one of the new AEOs in force at the same time. The rules for CTAEOs are that there cannot be more than two in force concurrently.
  
  
• Many computerised payroll systems are able to calculate AEOs and CTAEOs according to the existing rules, but no guidance is yet available in order for the new calculation to be computerised. The definitions of "attachable earnings" for AEOs and CTAEOs are different.
  
  
• It may be assumed that the priorities of the new AEOs over other court orders are not changing. However, as the percentage-based student loan deductions cannot be taken from wages while other percentage-based court orders are in force, it is not clear whether they may be deducted while one of the new AEOs is in force.

We are asking the Department for Constitutional Affairs for guidance on these issues and will report them as soon as we have a response.
(Source: www.hmso.gov.uk/acts/acts2003/20030039.htm
www.hmso.gov.uk/si/si2004/20040175.htm
www.hmso.gov.uk/si/si2004/20040176.htm
www.dca.gov.uk/enforcement/wp/chapter4.htm )
...back to 12 March 2004

Court Order Handbook

The Court Service has published a new and updated Handbook for employers on all types of attachment of earnings orders. It is available in electronic form and may be downloaded from the Court Service web site.
(Source: www.courtservice.gov.uk/cms/media/a_e_handbook.pdf)
...back to 25 April 2003

Scottish arrestment orders

New deduction rates for Scottish arrestment of earnings orders came into effect on 3 December 2001.

The Tables used for Earnings Arrestments were last updated in 1995. The rates have increased to reflect the overall increase in average earnings since the Debtors (Scotland) Act 1987 came into force. The latest Tables will be published in a coming update to the Payroll Handbook.

The fixed daily rate of protected earnings for Current Maintenance Arrestments is increased from £;9 to £;10. There is no change to the maximum 50p that may be charged for processing Scottish orders. - Payroll Briefing 216 - 17 January 2002